Your credit score is an essential part of life but something that you may not know or even think about. In simple terms, it is a rating given to you based on various factors around your personal finances and is used when you apply for any type of credit, like credit cards or personal loans.
Organisations will then look at this rating when you apply for things like mortgages or loans in order to see if they are happy to lend you the money.
With this in mind, it is key to do all you can to protect your credit score and keep it high. But what are the most common things to avoid that could damage it?
CCJ’s, IVA’s and bankruptcy
County Court Judgements, Individual Voluntary Arrangements and bankruptcy will all sit on your public record for a minimum of 6 years and harm your credit score. They could have a negative influence as it shows a history of going back on some kind of financial agreement previously to lenders.
Missing payments for things like a mortgage or credit card will harm your score as well. Once more, this is marked on your official record and could make future creditors nervous about getting back any money they lend you.
Applications for credit
Did you know that each time you apply for credit or say a debt consolidation loan, it triggers a hard credit search on your record and this is marked on your file?
While the odd application is fine, making a lot in a short space of time will negatively impact your credit score. This is especially true if you get rejected for most of them.
Moving around too much
When lenders are giving people money, they like to know the person is reliable. One way they ascertain this is by looking at how long you have lived at your current address. Moving around too much can harm your rating as lenders then feel nervous you may move again and not pay them back.
No active credit history
This can be a tricky one to solve but will harm your credit rating. If you do not have any active credit accounts, lenders have no information regarding your ability to borrow money and pay it back. This can lead to them playing it safe and classifying you as a higher credit risk to protect themselves.
The above shows just what type of factors can affect your credit score.
Luckily, most of them can be easily sorted out or solved to help get it back to a healthier level again. Just be careful of missed payments or official proceedings like CCJ’s as these can be much harder to deal with.
As with everything in life, the real secret is to avoid these common mistakes in the first place to maintain a decent credit score, take a look at some of our articles on saving and budgeting, there might be something that can help?