It is no secret that having a good credit rating and credit score is going to make your life a whole lot easier when it comes to your finances. A credit score is a value which acts as a reflection of your creditworthiness and potential lender use this score when they are considering your application for a loan.
Loan providers such as Everyday Loans and Next Credit use the credit score to decide whether they are going to grant you a loan as well as the rate they will charge you for a loan, credit cards or mortgages.
The highest score that you can achieve is 999 which indicates good credit and the lowest you can achieve is 0, which indicates that you have bad credit. Your credit rating is not fixed.
It can go up and down accordingly with your repayment habits, whether that be paying back what is due consistently or falling behind on repayments. Falling behind can serious affect your ability to access and obtain financial products.
There are some things which may surprise you that can cause people to see a decline in their credit rating. In this guide, we will explain the ones which you may not be aware of at all so that you do not make the same mistakes.
Having too many credit cards
These days, it is extremely easy to apply for a credit card. However, the impact that owning too many credit cards has can make potential lenders reluctant to deal with your request seeing as you potentially have access to thousands of pounds already. Access to this amount of money means you may take it and then make it harder to pay back an additional financial obligation. Moreover, having a number of credit card accounts open suggest that you are financially stretched and therefore not an ideal applicant for a loan or mortgage.
Mobile phone contract
If you do not pay off your mobile phone bill each month, it appears to lenders that you are financial difficulty, resulting in a fall in your credit score.
Do not make the mistake of upgrading your phone but leaving your old contract open. There have been several cases of people doing this without their knowledge, and since the contract has gone unpaid, their credit score as fallen.
There was one example in the UK where a person was denied a mortgage for having an old mobile phone contract still running in the background unpaid for two years. Always close old accounts just in case this happens.
Not checking your credit record
Most problems which result in a fall in your credit rating can be avoided by simply staying on top of your credit record. Websites such as ClearScore and Noodle offer this service. Most credit checking providers offer you a 14-day free trial so that you can review your credit records. After this period, you will normally be charged only a few pounds per month to continue using their services. You can usually request a one off report for as little as £2 – credit reference agencies are legally obligated to provide you with this service.