Advice and Tips

What affects your credit score

Amelia Scholey, Brand and Content Specialist
Sunday, 20 February 2022

It’s important for you to know what affects your credit score so that you can also understand what’s a good or bad credit score and how you can improve it.

Your credit score can affect your day to day life, from getting a phone contract or credit cards to taking our finance for a car. If you know what affects it then you can make small changes to your spending habits or credit usage before it’s too late. 

It’s important for you to know what affects your credit score so that you can also understand what’s a good or bad credit score and how you can improve it.

Your credit score can affect your day to day life, from getting a phone contract or credit cards to taking our finance for a car. If you know what affects it then you can make small changes to your spending habits or credit usage before it’s too late. 

What factors affect your credit score?

What factors affect your credit score?

1. Missing payments

A missing payment is different to a late payment, but both will affect your credit score negatively.  

A late payment is where you have paid your bill late, but before the next billing cycle. These can be not as damaging as a missed payment, but they are still not advised. 

A missed payment is where you completely miss a months bill all together and this will show negatively on your credit file. A missed payment can stay on your record for several years so we would always advise to never take out unnecessary loans or contracts unless you are entirely sure you can make the monthly payments. 

Missed payments for utlity bills can also affect your credit score. 

A woman looking concerned

1. Missing payments

A missing payment is different to a late payment, but both will affect your credit score negatively.  

A late payment is where you have paid your bill late, but before the next billing cycle. These can be not as damaging as a missed payment, but they are still not advised. 

A missed payment is where you completely miss a months bill all together and this will show negatively on your credit file. A missed payment can stay on your record for several years so we would always advise to never take out unnecessary loans or contracts unless you are entirely sure you can make the monthly payments. 

Missed payments for utlity bills can also affect your credit score. 

A woman looking concerned

2. Applying for credit too often

Applying for credit too often can show to lenders that you are desperate for credit. With every application for credit there is often a hard search conducted on your file, this will cause your credit score to drop. It’s advised to keep hard searches to 1 a month for it to not drastically affect your credit score. 

According to Experian even if you have a strong credit score and a credit file with no credit issues then your credit score can still dip 5 points or less when a hard search is done on your file. This is also temporary. 

So whether your credit score is good or bad, we would always suggest considering if you need to apply for that new line of credit or whether you can wait until the time is right for your score. If you can’t wait then try to apply for loans or credit that you know you are eligible for and are likely to be accepted. This will reduce the chances of having to apply several times and increasing the hard searches done on your file. 

3. Being close to your credit limit

Even though you may have access to £4,000 on your credit cards (for example) that doesn’t mean you should use it all. 

Your credit score is affected by your credit utilisation, which is the percentage of credit that you use compared to the amount you have access to. The credit reference agency Experian recommends that you should use no more than 30% of the credit on offer to you. 

Using more than 50% could show to lenders that you are unable to manage the credit you currently have and reflect negatively on your credit score. 

2. Applying for credit too often

Applying for credit too often can show to lenders that you are desperate for credit. With every application for credit there is often a hard search conducted on your file, this will cause your credit score to drop. It’s advised to keep hard searches to 1 a month for it to not drastically affect your credit score. 

According to Experian even if you have a strong credit score and a credit file with no credit issues then your credit score can still dip 5 points or less when a hard search is done on your file. This is also temporary. 

So whether your credit score is good or bad, we would always suggest considering if you need to apply for that new line of credit or whether you can wait until the time is right for your score. If you can’t wait then try to apply for loans or credit that you know you are eligible for and are likely to be accepted. This will reduce the chances of having to apply several times and increasing the hard searches done on your file. 

3. Being close to your credit limit

Even though you may have access to £4,000 on your credit cards (for example) that doesn’t mean you should use it all. 

Your credit score is affected by your credit utilisation, which is the percentage of credit that you use compared to the amount you have access to. The credit reference agency Experian recommends that you should use no more than 30% of the credit on offer to you. 

Using more than 50% could show to lenders that you are unable to manage the credit you currently have and reflect negatively on your credit score. 

4. Having lots of credit card accounts

Although you might want to keep some credit cards for a rainy day, it can actually damage your credit score having too many credit card accounts open at once.

There are 2 reasons why having too many credit cards can impact your credit score:

  • You can be using them all close to their limit which highlights the point above in #3, and will show to lenders that you may not be responsible with your credit usage.
  • You may not be using them enough, which can reduce the amount of information that lenders like to see on how you deal with credit. This could affect your credit score negatively as there will be limited information on your file.
Credit cards

4. Having lots of credit card accounts

Although you might want to keep some credit cards for a rainy day, it can actually damage your credit score having too many credit card accounts open at once.

There are 2 reasons why having too many credit cards can impact your credit score:

  • You can be using them all close to their limit which highlights the point above in #3, and will show to lenders that you may not be responsible with your credit usage.
  • You may not be using them enough, which can reduce the amount of information that lenders like to see on how you deal with credit. This could affect your credit score negatively as there will be limited information on your file.
Credit cards

5. Having little or no credit history

Similarly to not using credit cards enough, having little to no credit history can affect your credit score. 

If you have never had any line of credit, then credit reference agencies, like Experian, have no information to build a credit report on you. As your credit score is a number based on information in your credit report then this will affect your score.

6. Hard credit searches

As we discussed in point 2 above, too many hard credit searches will reflect negatively on your credit score. Too many hard searches will make you appear as though you are desperate for the money which can be unappealing to lenders.

There are 2 types of searches, soft credit searches and hard credit searches and only the hard searches will have an impact on your score.

When searching for credit companies, try to find one that will be able to tell you initially whether they would accept based on a soft search as this doesn’t affect your credit score. 

5. Having little or no credit history

Similarly to not using credit cards enough, having little to no credit history can affect your credit score. 

If you have never had any line of credit, then credit reference agencies, like Experian, have no information to build a credit report on you. As your credit score is a number based on information in your credit report then this will affect your score.

6. Hard credit searches

As we discussed in point 2 above, too many hard credit searches will reflect negatively on your credit score. Too many hard searches will make you appear as though you are desperate for the money which can be unappealing to lenders.

There are 2 types of searches, soft credit searches and hard credit searches and only the hard searches will have an impact on your score.

When searching for credit companies, try to find one that will be able to tell you initially whether they would accept based on a soft search as this doesn’t affect your credit score. 

7. Falling into arrears

Falling into arrears simply means that you have missed 1 or more payments in succession. Like missed payments, falling into arrears on any finance agreements will reflect negatively on your credit score.

Nobody ever wants to miss payments, but it’s important that you pay your bills on time to keep a healthy credit score. 

The credit reference agency Equifax confirm that arrears that haven’t been paid for 30 days or more will remain on your credit file for 7 years, which will affect your credit score. 

A woman with credit cards

7. Falling into arrears

Falling into arrears simply means that you have missed 1 or more payments in succession. Like missed payments, falling into arrears on any finance agreements will reflect negatively on your credit score.

Nobody ever wants to miss payments, but it’s important that you pay your bills on time to keep a healthy credit score. 

The credit reference agency Equifax confirm that arrears that haven’t been paid for 30 days or more will remain on your credit file for 7 years, which will affect your credit score. 

A woman with credit cards

What doesn't affect your credit score?

What doesn't affect your credit score?

1. Friends or family

Just because you live with friends or family does not mean that you are financially linked to them. You are only financially linked to someone if you open up a joint account or joint finance agreement with them, like a mortgage. 

Simply just living with someone or paying rent at the same property does not make you financially linked. Therefore friends or family you are not financially linked with will not affect your credit score.

1. Friends or family

Just because you live with friends or family does not mean that you are financially linked to them. You are only financially linked to someone if you open up a joint account or joint finance agreement with them, like a mortgage. 

Simply just living with someone or paying rent at the same property does not make you financially linked. Therefore friends or family you are not financially linked with will not affect your credit score.

2. Your distant credit history

Most of the information on your credit file will only show for a maximum of 7 years. Therefore if you missed a payment over a decade ago then this won’t affect your credit score now.

Even then most credit reference agencies focus their scoring by looking at the information that is most recent on your credit file.

2. Your distant credit history

Most of the information on your credit file will only show for a maximum of 7 years. Therefore if you missed a payment over a decade ago then this won’t affect your credit score now.

Even then most credit reference agencies focus their scoring by looking at the information that is most recent on your credit file.

3. Checking your credit report

Checking your credit report will mean a soft search is ran on it so that you can see the information. However soft searches do not affect your credit score. You can check your credit report as many times as you want and this will not affect your credit score. 

3. Checking your credit report

Checking your credit report will mean a soft search is ran on it so that you can see the information. However soft searches do not affect your credit score. You can check your credit report as many times as you want and this will not affect your credit score. 

4. Changes in income

Your income is not shown on your credit report and therefore any changes to it cannot affect your credit score. 

However lenders will ask you directly for your income to understand if you can afford the loan you are asking for. 

Man with wallet

4. Changes in income

Your income is not shown on your credit report and therefore any changes to it cannot affect your credit score. 

However lenders will ask you directly for your income to understand if you can afford the loan you are asking for. 

Man with wallet

5. People who used to live at your home address

It doesn’t matter if the people who lived at your address before were bankrupt or had a CCJ or IVA because your credit score will not be affected by this. 

Your credit report doesn’t link you to people with the same address but just those who are financially linked to you, through joint accounts or joint finance agreements. 

5. People who used to live at your home address

It doesn’t matter if the people who lived at your address before were bankrupt or had a CCJ or IVA because your credit score will not be affected by this. 

Your credit report doesn’t link you to people with the same address but just those who are financially linked to you, through joint accounts or joint finance agreements. 

How does a CCJ affect my credit score?

A County Court Judgement also known as a CCJ is given to someone by the court when they owe someone money and they have been court ruled to pay them back. But how does a CCJ affect my credit score?

As a CCJ is given because you owe money, in the lenders eyes it negatively reflects on how responsible you are with credit. A CCJ will show on your credit report for 6 years and can often affect your ability to get credit as it significantly lowers your credit score. 

However if you are given a CCJ, there is the opportunity to pay it off within 1 month. If you are able to pay your debt off in full within the month then you can apply for the CCJ to be removed from their register. You would then need to get a certificate from the court to show you have paid off your debt within the month. If you are removed from the courts register then the credit references agencies will also remove it from your credit file. Potentially stopping your credit score from dropping significantly. 

How does a CCJ affect my credit score?

A County Court Judgement also known as a CCJ is given to someone by the court when they owe someone money and they have been court ruled to pay them back. But how does a CCJ affect my credit score?

As a CCJ is given because you owe money, in the lenders eyes it negatively reflects on how responsible you are with credit. A CCJ will show on your credit report for 6 years and can often affect your ability to get credit as it significantly lowers your credit score. 

However if you are given a CCJ, there is the opportunity to pay it off within 1 month. If you are able to pay your debt off in full within the month then you can apply for the CCJ to be removed from their register. You would then need to get a certificate from the court to show you have paid off your debt within the month. If you are removed from the courts register then the credit references agencies will also remove it from your credit file. Potentially stopping your credit score from dropping significantly. 

Amelia Scholey, Brand and Content Specialist
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