Understanding the factors that negatively impact your credit score
Maintaining a good credit score is crucial for financial well-being. However, certain actions and circumstances can negatively impact your credit score. Take a look at some of the key factors that can harm your credit score and how to avoid them.
Late and/or missed payments
Consistently making late payments or missing them all together is one of the most detrimental factors affecting your credit history. Lenders view this as a sign of financial irresponsibility and may make them hesitant to accept any future applications.
Our tips
To help keep up repayments consider setting up payment reminders, automating direct debits and creating a budget to ensure timely repayments.
High Credit Utilisation
Credit utilisation refers to the amount of available credit you are currently using. Try not to max out your credit cards or overdraft as lenders may think you’re over reliant on credit or in financial difficulty.
Our tips
Try to keep your credit utilisation below 30%, the lower you can get it, the better for your credit score.
Defaulting on payments
Defaulting on repayments for things such as loans, credit cards, mortgages or other financial responsibilities can severely impact your credit score.
Our tips
If you are facing financial difficulties contact your lenders to explore options such as repayment plans or debt management programs.
Frequency of credit applications
Frequent credit applications within a short period of time can negatively impact your credit score. To a lender it may indicate financial instability or a desperation for credit
Our tips
Consider using eligibility checkers before submitting formal applications to assess your chances of approval. Apply for credit sparingly and only when necessary.
County Court Judgments (CCJs)
CCJs are court orders issued against individuals who fail to repay their debts. They remain on your credit file for six years and significantly reduce your creditworthiness. Typically CCJs are used by lenders to claim back money in a legal procedure.
Our tips
If you are facing financial difficulties contact your lenders to explore options such as repayment plans or debt management programs.
Frequency of credit applications
Frequent credit applications within a short period of time can negatively impact your credit score. To a lender it may indicate financial instability or a desperation for credit
Our tips
Consider using eligibility checkers before submitting formal applications to assess your chances of approval. Apply for credit sparingly and only when necessary.
Financial Associations
Being financially linked to someone with poor credit can impact your credit score. This typically occurs when sharing a joint account or taking out loans with a partner or family member.
Our tips
Regularly review your financial associations and end any links if they are no longer necessary or if the linked person’s credit behaviour is negatively affecting yours.
Little or no financial history
You may struggle to get credit if you have never borrowed before, without credit history lenders have no information to evaluate your creditworthiness. They may be hesitant to approve credit application due to the lack of evidence regarding your ability to manage debts.
Maintaining a healthy credit score is essential in accessing favourable financial opportunities. By understanding and avoiding the factors that can negatively impact your credit score you can be proactive in taking the steps to improve and protect your creditworthiness.
