10 Factors That Could Affect Your Credit Score

First things first: you need to know what a credit score is. A credit score is something lenders use to evaluate the probability of whether you will be able to pay off your debts. Your credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy you’re considered to be. Your credit can come in many different forms, from credit cards to personal loans and store cards. “Paying utilities on time, using an overdraft sensibly, and even having a mobile phone contract are all forms of credit, and can all contribute to a good credit score if used properly,” Alastair Douglas, CEO of credit experts TotallyMoney, says. Bad credit scores can prevent you from applying for a mortgage or an overdraft, so it’s key that you try and maintain a good credit score. But how can you do this? And what are the things that affect your score? Unfortunately, there’s plenty that can affect your score – and some of them are very unexpected…

1. Your Credit Score Lasts For Seven Years

Just like bad luck, credit hangs around for seven years. So you need to start being smart with your money ASAP, because as the experts at Tandem Bank tell us, even small mistakes like late payments will stay on your credit report for those seven years.

2. You Should Get Yourself On The Electoral Register

One of the things you can do to instantly improve your credit rating is to get yourself on the electoral register. “The electoral roll is used by many companies for identity verification purposes in order to combat identity fraud,” the experts at Equifax tell us. “It is important, therefore, that you are registered on the electoral roll at your current address.”

3. Don’t Mess Around With Your References

We’ve all sent money to our friends with a funny reference, but turns out that the people checking your credit score won’t be as amused. “When you're applying for a mortgage remember it is not always just the credit score that can make or break – check your payment references!” The pros at Tandem Bank warn. “A joke reference on a £10 transfer from a friend may be hilarious at the time, but anything that makes you look risky could be the reason you're rejected even after years of work on your credit history.” So take a couple of minutes to change all of your references to something less fun and more sensible.

4. You Need To Have Some Credit

You might think it’s better to not have any credit cards – no card, no debt right? Wrong: “Lenders like to make informed decisions. If you have limited or no credit history, then lenders have insufficient financial information about past behaviour to use when making their decision,” the experts at Credit Karma advise. “This may increase your chances of being refused credit.” Of course, that doesn’t mean you should go to town on your credit card – you just need to find a good balance, so lenders don’t see you as a risk.  However, that doesn’t mean spending a lot of money on credit is good for your score. It’s important to find a healthy balance, so lenders don’t see you as a risk.

5. Don’t Take Out Too Much Credit At Once

“Avoid multiple applications in a short space of time. Each credit application logs a search on your credit file,” warn the experts at Equifax. “Too many could appear as if you already have too many commitments” It’s a trap that many fall into, says Zarah Gulfraz, Mortgage Expert at Mojo Mortgages: “Once a mortgage offer is issued, people then start to purchase furniture or pay for renovations. The impact this has is that at any point before completion, lenders can check your credit score, which can lead to your offer being withdrawn.”

6. Don’t Do Multiple Credit Searches

When you’re shopping around for the best mortgage deal, try not to apply to any until you’re sure which one you want to go with, and then just pick one. “Clients can unintentionally reduce their credit score by applying with multiple lenders,” says Zarah. “The best way to find the best deal is to speak to a whole of market mortgage adviser, who can recommend the best deal based on research and expertise, so you can just apply for one that adequately meets your needs and requirements.”

7. Keep An Eye On Your Direct Debits

This is where it can get confusing – if you have any direct debits that are paid on the last day of the month, change it immediately, because a missed payment can be detrimental to your credit score. “If your direct debit is paid on the last day of the month, and you miss this or make your payment the following month, even if that is the very next day, this is classed as missed payment and not a late payment, as it was paid in the next calendar month.” At least if you miss the payment on the first, you have that month to rectify it.

8. Don’t Close Old Cards Or Open New Ones

It’s a tricky line to walk, this credit stuff. According to Credit Karma, the longer your credit history -or, more specifically, the length of time since the credit account has been open and the average age of your accounts – the better. “Opening new accounts can lower your average age of accounts and can damage your overall score. A longer credit history provides more insight into long-term financial behaviour. So don’t close old credit cards – you can risk shortening the length of your credit history by closing old cards. Old accounts can impact your credit utilisation ratio as well.”

9. Staying At One Address Will Work In Your Favour

Banks and lenders favour those who are stable and secure – which includes your address. “Make sure your bank and any credit providers know your addresses and postcode,” says Justin Basini, Co-Founder & CEO at ClearScore. “Lenders like consistency and reliability, and if your addresses don’t match up, banks and credit card providers might worry you’re not who you say you are. Also, if you have a financial product in your name, but with a different address, it may not sync to your report, and therefore not count towards your credit score.”

10. Your Partner’s Credit Score Can Affect Yours

If you are thinking about taking that next step in your relationship and opening a joint bank account with your partner, maybe check how good they are with money first. “Be careful when opening joint accounts or mortgages, as your partner's credit score can impact yours, for better or for worse,” say Tandem Bank. If you think they might be bad with their cash, screw the romance – keep your accounts separate. Your credit score will thank you for it.