Your Credit Score
When you apply for a bank account, credit card, personal loan, mortgage or hire purchase agreement, the lender will run your application through a credit scoring system. Credit scoring works by awarding points (or deducting points) according to the answers you give on the application form.
Although it is very unlikely a lender will reveal exactly how they score a credit application (due to the fact that it might encourage people to give false answers to boost their score) there are general rules that apply to almost all applications. Owning your own home or having lived in your current home for a long time helps, as does being in the same job for a long time. Being married often works in your favour, but having children has been known to work against you. Having a new or no bank account will look bad. Basically, lenders are looking for settled, stable and responsible applicants as they are statistically less likely to default on a loan.
5 things that will kill your Credit Score
1. Electoral Roll
Not being on the Electoral Roll can severely hamper any application for credit. Make sure your details are up to date if you have recently moved house, etc.
2. Poor Credit History
Up to 35% of your credit score will be accounted for by your previous credit history. CCJ's, defaults and late/missed payments will all stay on your credit file for 6 years, but a sustained period (around 12 months) of regular payments will help to counterbalance the negatives.
3. Time at current address
If you have lived at your current address for less than 3 years, your credit score will be adversely affected. This is especially true if you are a tenant. The more addresses you have had in the 3 years, the greater the negative effect will be.
4. Too many credit applications over a short period
Each time you apply for credit (any credit), a search will be made and recorded on your credit file. If you are seen to be applying unsuccessfully to too many lenders in a short space of time, your credit score will be affected negatively. Try not to make more than 1 or 2 applications a month.
5. New Job
Lenders are looking for continuity in your employment record, so being in the same job for a long time will give you the best credit score for this section. 2 jobs in three years need not make too much difference, especially if it can be shown that you changed jobs for a pay increase. Periods of unemployment between jobs will also look bad to lenders.
About the Author
This article was written and supplied by
Finance Extra, the place to find free personal finance advice.
