Damage your credit score

5 Ways to Damage your Credit Score

Rightly or wrongly, the health of your credit score is incredibly important as it helps lenders, banks and credit authorities build up a clearer picture of

whether you are financially responsible and reliable. Your credit score will play a major part in determining whether you have access to loans, credit cards and additional borrowing, whilst also allowing you to access the best rates for these products depending on your score.

Regulators are quite tight-lipped about exactly how each person’s individual credit score is calculated. Thankfully, however, there are lots of ways in which you can help maintain a healthy credit score, including by avoiding the following:

1) Late (or missed) payments

Late or missed payments can have a substantial negative impact on your credit score. This is a relatively simple way in which lenders can assess whether you are able to make required payments on time.

Thankfully, setting up direct debit arrangements with your various providers is usually a relatively simple process to complete, and can help avoid serious and long-term harm to your credit score.

2) Too many applications

Online eligibility checkers are now commonplace for most credit providers, so you should make the most of them! Most of these checks will take only a matter of minutes and provide an accurate assessment of whether that particular lender is likely to accept your application and help you avoid multiple rejections.

3) Using up your available credit

A high credit utilisation ratio can be a crucial warning sign for lenders that you are too reliant on your existing credit. Lenders usually look favourably on you if your credit utilisation ratio is under 30%, with under 10% being the ideal scenario. This ratio is calculated by dividing your total amount of revolving credit by the total of all your credit limits.

4) Opening lots of new credit accounts

Each time you submit a formal application for credit, a ‘hard’ enquiry is carried out and recorded on your credit report that lasts for up to two years. Lots of different applications in a short timeframe can, therefore, have a negative impact on your score, as it can be a signal that you’re in a poor financial situation or have been denied credit elsewhere.

5) Inaccurate information on your report

In amongst ensuring that your payments are made on time, your credit utilisation ratio is low and that you’re not making too many new credit applications, the importance of checking the accuracy of the information that credit reference agencies hold can be lost.

It’s a good idea to regularly check up on this information as it could be having an unnecessarily damaging impact on your score. If you do find anything that’s incorrect or out of date, then be sure to initiate a dispute with that company to get it updated as soon as possible.

Here at BingoLoans, we are always looking to provide you with interesting information regarding finance, money saving, budgeting, etc. so if you found this article useful you’ll love our articles section.

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