There are many factors that affect how financially attractive you are when attempting to get the best credit deals and offers. So if you want to improve your credit rating and score, learning what factors affect it is a good place to start.
With the above in mind, please see below details of areas which could be having the biggest impact on your overall score:
- Your financial account payment history
Lenders like routine and want to know that you regularly make your credit payments on time. If you’ve missed any in the past, they may decide you are more of a risk to lend to and offer you a higher interest rate. If you’ve missed a payment - you’ll need to record 16 months’ of on-time payments for your score to improve.
- Judgments, bankruptcies and insolvencies
Records of judgments and insolvencies stay on your credit file for up to 6 years (and in some instances longer!).
Lenders will consider you a higher risk as you’ve been unable to meet your past credit commitments in the past. If you have been unable to repay your debts once, you may be unable to repay them again.
- Credit Utilisation
Lenders like to see you’re not using too much of your credit limit. Using less of it shows them you can manage what’s available responsibly. Keeping your credit utilisation lower will also give you a helpful cushion should you need to cover expenses in any unexpected circumstances.
Keeping existing credit accounts open is a good thing, especially if you can keep your utilisation between 1-25%. If you’re not in a position to do that all at once, try to pay a little extra against your balances to bring you closer to the 1-25% range.
- New Accounts
Lenders prefer to know you’re committed to meeting your payments with them. They don’t like to see account openings in the last 6 months as this can place strain on your commitment to them.
Limit the impact on your credit score through the number of accounts you open within a 6 month stretch. Lower is better: if you need a new credit account, aim for no more than 1-2 opening within this time period. Go steady with applications too, each one leaves a hard search on your report and lenders don’t like to see too many of these.
- Credit Limits
Having a higher credit limit can show lenders that you’re a responsible borrower and therefore a lower risk. It also acts as an indicator of your ability to manage unexpected expenses, and gives you a buffer should you need it.
Increasing your credit limit on existing accounts is the best starting point. Just remember, making on-time payments and continuing to use less of your existing credit limit will do more for your score than opting to open a new account.
- Being on the Electoral Register
Being on the Electoral Register is an easy way to make lenders aware that you are at a stable address history and can therefore be contacted for any money owed. If you are not already on the Electoral Register, you can be added via: www.yourvotematters.co.uk
If you haven’t already - go and register. Once you have, it really is a case of things improving over time. After 18 months at the same address you’ll notice improvements in your score, and once you’ve reached 6 years’ and beyond, you’ll be achieving maximum impact on your score.
- Credit Age
The longer your financial history is with one lender the more new lenders like it. It shows you’ve been financially responsible for a long time and understand how to manage your credit.
Keep your account open for as long you possibly can. It doesn’t even matter if you’re not using it, after a year your score will improve and continue to do so at 6 years’ and beyond. It’s a simple equation, longer equals better.
Lenders consider homeowners less of a risk - that’s because a borrower with an up to date mortgage loan is an indication of both ongoing commitment and financial stability.
- People you are financially linked to
Whilst people you’re financially connected to won’t have an impact on your credit score they can have an influence on your ability to obtain credit if their connection to you leads to negative information.
Make sure you regularly check your credit report to ensure all your financial associates are still relevant, and if not please raise a dispute to disassociate from them to avoid their influence on any credit applications you make in the future.
Rest assured, just living with someone doesn’t create a financial connection. You need to have a joint loan, mortgage or bank account to create financial links.
- Hard Searches
While Searches do not reflect in your credit score with TransUnion, these might be used by lenders to make an assessment of your risk.