No one has just one credit score or a credit report. Lenders, providing a £500 loan or a home mortgage loan, have their assessment techniques for calculating a credit score and this includes the three different UK credit reference agencies (CRAs). Every organization may have a different criteria for working out an individual’s credit score based on what that organization considers important. These organizations may view the same information differently.
For example, some kinds of records and transactions might be viewed as positive signs by a certain agency, while another organization might find the same history as negative records. This means that you might have a different credit score based on the CRA you used to assess your credit history. Some credit scores are expressed as a number with a range of upto a maximum of 700 and other credit scores have a maximum limit of 1,000. In most cases, credit scores are updated every 30 days
What Affects Your Credit Score Negatively?
Now that we know that no one has a single credit score it is important to understand what affects your credit score negatively. Companies often view some of these activities on a credit report as a red flag. Always avoid red flags to maintain a good credit standing
- Periodically opening up new accounts within a short span of time. Every time you open up a new bank account it will lower your credit score. Your credit score will recover the longer you maintain a bank account.
- Continuously being over your credit limit for long periods. Lenders may consider that you are in a time of financial difficulty.
- Not making the repayments on time for more than two consecutive months. This will hurt your credit score for up to six years.
- Frequently seeking credit options even after being declined by several lenders.
All of these things and more can affect your credit score negatively.
What Affects Your Credit Score Positively?
The most important factor to maintaining a good credit score is having a record of handling money responsibly. This does not in any way mean that you should not borrow money. On the contrary, lenders want to see that an individual has a prior record of successfully borrowing and paying off loans on time.
The following are some steps you can take to ensure that you have a good credit score or credit history:
- Do not take out a loan of more than you can afford. Make sure that you can make the minimum repayments on any loan or purchase you make.
- Set up direct debits for regular expenses that you need to pay on a monthly basis.
- Pay off persisting loans anytime you have an excess cash flow. You will have a positive credit score the less you have to pay back.
- Maintain old bank accounts in a good condition because CRAs often look at how long you have successfully held a bank account in good standing.
- Regularly check your credit report for redundancies and make sure that you are aware of all the transactions.
These are just some of the things that affect your credit score positively and there might be more.