Your credit score plays a major role in shaping your financial health, determining everything from the mortgage deal you secure to the cost of insurance. It’s no secret that missed payments, credit card debt and bankruptcies can impact your score significantly. But some lesser-known factors might surprise you.
Let’s explore some of the potentially surprising factors that hold weight in your credit score.
Registering on the electoral roll
Simply registering to vote can positively impact your credit score as lenders use the electoral roll to confirm your identity and address. If you aren’t registered, you may appear less trustworthy to potential creditors.
This is a quick and free way to boost your credit score, so if you haven’t done it yet, get yourself registered on the electoral roll.
Responsible credit utilisation
Most people know that maxing out your credit card is bad for your score, but fewer realise that even using too much of your available credit can be a red flag to lenders. The magic number? Keep your credit usage under 30%. For example, if your card has a £1,000 limit, you should aim to keep your balance under £300 to avoid damaging your score.
Related: What to do if your mortgage application fails
Credit history
It might seem strange, but having no credit history can be just as damaging as having a bad credit score. If you have never taken out a credit card, loan, or even a utility bill in your name, lenders have no information to base your reliability on. Consider taking out a low-limit credit card, using it for small purchases and paying it off in full each month to build a solid credit history.
Frequent address changes
If you move house often, this might impact your credit score. Lenders prefer stability, and frequent changes of address can make you appear less financially stable. If you move regularly for work or personal reasons, try to minimise disruptions by ensuring all your accounts are updated with your new address promptly. Additionally, staying on the electoral roll throughout these moves is crucial.
Applying for too much credit at once
It might seem harmless to apply for more than one credit card or loan to see which offers the best deal, but each application leaves a footprint on your credit report. Lenders interpret multiple applications in a short space of time as a sign of financial distress. To avoid damaging your score, space out your credit applications or use comparison websites that offer soft searches without leaving a mark on your report.
Your partner’s financial habits
If you’re planning on taking out a joint mortgage with your partner, their credit habits can also affect yours. If they have a poor credit history, your ability to borrow money together may be compromised. While their credit report won’t directly affect your score, any joint financial agreements can create a link that lenders may consider. Before signing up for joint accounts, have an honest conversation with your partner about your financial habits and goals.
Related: Do I need a financial adviser?
Closing old credit accounts
You might think that closing a credit card you no longer use is a smart move, but it could actually hurt your score. The length of your credit history is one factor used to calculate your score, and closing old accounts could shorten your history, making you appear less experienced with credit. Instead, consider keeping the card open but unused, or using it for small purchases and paying it off immediately.
Using buy now, pay later services
Buy Now, Pay Later (BNPL) services have grown in popularity due to their convenience. However the use of these services can impact your credit score in unexpected ways. While some BNPL providers don’t report to credit agencies, others do. Missed payments on these services can harm your score. So it’s important to keep track of what you owe and ensure timely repayments.
Unpaid utility or mobile phone bills
It’s a common misconception that your credit score is only linked to loans and credit cards, but even your monthly utility and mobile phone bills can affect it. Many providers report to credit agencies, so a missed payment on your gas bill or phone contract can lower your score. Set up direct debits to avoid missed payments and stay on top of those bills.
Related: 10 ways to cut down your gas bill
Having too many credit accounts
While building up some credit history is good, having too many open credit accounts can negatively affect your score. Lenders might view this as a sign that you rely too heavily on credit. Regularly review your credit accounts and consider closing any that you no longer use. But remember not to close your oldest accounts, as mentioned earlier.
For more moving advice, contact your local Ellis & Co branch today
