5 surprising factors that could affect your credit score
A credit score is a number on a scoring system that reflects how reliable you are when it comes to repaying money that you’ve borrowed from a credit provider. This is known as your ‘creditworthiness’.
When you make a credit application, whether that’s a mortgage, loan, or credit card, your credit score will play a role in the lender’s decision. Generally, the better your credit score, the better your chances of being approved for a credit product, although it’s important to bear in mind that nobody is guaranteed to be accepted for credit, regardless of their score.
Your credit score is decided by several factors, including how past credit commitments have been handled and whether your bills are paid on time each month. There are also a number of lesser-known factors that can affect your credit score, as explained in our guide below.
1. The number of credit applications that you make
When you apply for credit, the provider will complete a creditworthiness assessment, and this will include a hard search or Open Banking. Multiple hard searches within a short space of time will have a negative impact on your credit score.
Here’s an example:
Your car breaks down and you need £400 to pay for the repairs upfront. You don’t have the savings to fall back on, so after careful research, you decide to apply for a loan.
After undergoing a hard search as part of the creditworthiness assessment, you’re turned down by the first lender you apply to. You make another application with a different lender, who also completes a hard search and turns down your application. The third lender you apply with accepts your application, but not before they’ve also run a hard search.
While you managed to get a loan, you now have three new hard searches on your credit file, which will be visible for up to 12 months. This could damage your credit score, which in turn could impact your chances of being approved for credit in the future, should you need it.
One way to reduce the risk of multiple hard searches is to use a credit broker, such as Growing Power.
If you’re looking for a short-term, personal loan, Growing Power could help.
Growing Power works with over 30 direct lenders. We’re able to scan our panel for a suitable loan for you, without harming your credit score, using soft search technology.
If you’re matched with a loan and choose to make a full application with the lender, a creditworthiness assessment will be carried out, and this will include a hard search or Open Banking. As discussed, a hard search will be visible on your credit file for up to 12 months, and multiple hard searches in a short period of time will affect your credit score.
2. Whether you’re registered to vote
Believe it or not, being on the electoral roll could have a positive influence on your credit score.
Registering to vote will make it easier for potential lenders to identify you at your current address.
Experian, one of the UK’s leading credit reference agencies (CRAs), say that being on the electoral roll could also help to prevent processing delays when you apply for credit. If the credit provider can find you and your details on the electoral roll, they may not need to ask for supporting documents, which could result in a smoother application process.
3. How often you move house
While moving house won’t directly affect your credit score, factors linked to it could have an impact.
When a potential credit provider assesses your application, they will look for stability in your circumstances. Credit providers may view a record of regularly moving house as an indication that you were unable to afford rent, which could go against your application.
We’ve talked about the importance of being on the electoral roll in the section above. When you move, you should aim to update your details on the electoral roll as soon as possible.
Moving house can be unavoidable, and of course, you shouldn’t base important life decisions, such as relocating, around the worry of potential changes to your credit score. However, it helps to be aware of how this could play a part in score fluctuations.
4. Who you’re financially associated with
Sharing a joint account or credit product with someone, whether it’s a mortgage or bank account, links you to them financially. This is called a ‘financial association’.
If the person you’re financially associated with has a bad credit score, your score could suffer as a result, and it could jeopardise your chances of being approved for credit.
Remember, marriage doesn’t financially link you to your spouse; to be considered financially associated, you’ll need to have joint finances.
If someone you’re financially associated with has poor credit, you may wish to share with them our tips to work towards a healthier credit position, which are listed at the bottom of the page.
5. How you use your credit card
Your credit card usage has a huge impact on your credit score.
It’s crucial that a credit card is used sensibly and responsibly. Here are some things you can do to assist with optimum credit card health in regard to your credit score:
- You should steer clear of using your credit card to withdraw money from a cash machine.
- Your credit limit is the total amount of money that you’re approved to borrow on your credit card. You should never exceed your credit limit, and it should never be viewed as an incentive to spend money that you don’t need to, or that you can’t afford to repay.
- Be mindful of your credit card utilisation. This is the amount of money you’re using of your overall credit limit and is shown as a percentage. The less money you’re using, the lower your utilisation. If you aim to improve or maintain your current score, try to keep your credit card utilisation as low as possible.
- Make at least the minimum required repayment amount on time each month. A late or missed repayment will have a negative effect on your credit score. If you think you’re going to make a late repayment or miss one altogether, please contact your lender as soon as you can. They will be keen to work with you to put a plan in place.
Where to check your credit score
You can check your credit score and report with the three main CRAs:
Please note that after an initial 30-day free trial period, you’ll be charged £14.95 per month to use Equifax.
With Experian, you can access a basic view of your credit report for free or opt for a more in-depth report for £14.99 a month.
TransUnion is free to use.
Ways to work towards a healthier credit position
- Register to vote.
- Pay your bills on time each month.
- Ensure that any current credit commitments are paid on time and in full.
- Make a habit of regularly checking your credit report for errors and flag any inaccuracies with the CRA.
- Keep your credit applications to a minimum.
- If you need to apply for credit, consider using a credit broker to help you find a suitable lender, rather than risking applying to multiple direct lenders.
- If you have a credit card, avoid using it to withdraw money from a cash machine.
- Keep your credit card utilisation as low as possible and stay well within your credit limit.
Worried about money?
If you’re concerned about money or debt, please know that you can reach out to any of the following organisations for free, confidential advice: StepChange, MoneyHelper, Citizens Advice, and National Debtline.