Are You Doing the 11 Worst Things for Your Credit Score?
Most of us know roughly what a credit score or credit rating is – it’s a number that goes up or down depending to what we’ve done in the past and present with money, especially when it comes to loans and credit cards. Typically, a high number is good – as in it will get you better deals/more credit. And a low number is bad – it might give you less choice. But there’s always uncertainty with credit scores about what affect certain actions have on your score. That’s why we’ve pulled together the worst things you can do for your credit rating.
Four big bad credit score killers
1. Paying late
Something that is really easy to do, but can really hurt your credit rating is to make late payments. It might seem harmless to pay off your card a couple of days late, but it can make a big impact.
Defaulting is banking-speak for simply not paying your debts – it’s like the next step on from paying late. It’ll leave a big mark on your credit report, also called a credit file, which is the name for the big list of details about your finances your credit score is worked out from.
3. County Court Judgments (CCJ)
When you default, you might get a County Court Judgment (CCJ), for example, if you don’t pay a Council Tax bill. These stay on your credit file for six years. It’s also possible (but rare!) to go to prison for unpaid Council Tax, so get free debt advice if you’re in this situation.
4. Not being on the electoral roll
Even if you don’t vote, not being on the electoral roll is lowering your credit score, and it takes about a minute to register online to fix it.
And the ones that sneak under the radar
5. Minimum payments
A minimum payment is really that – the smallest amount you can pay to keep the credit card company off your back. Your credit score sees it differently though and knocks off some points because it looks like you can’t pay off your debt. Paying off as much of the statement as you can means less negative points on your file.
6. Taking out cash on credit cards
Cash withdrawals on a debit card are fine, but as soon as you take cash out using a credit card, your score takes a hit. You also get charged extra for taking cash out on credit. Your best bet is to just not do it.
7. Applying for credit over and over and over…
Applying and being turned down for a credit card is likely to hurt your credit score. If you find yourself applying and being rejected five times in a week – you’re going to do five times the damage! Comparison sites will normally use a ‘soft search’ which won’t affect your score. Check when you apply for credit what sort of search is being done.
8. Old accounts with the wrong address
Your credit file needs to be all neat and tidy so when banks look at it, they know it’s all legit. Old accounts with different addresses make them wonder what address is right, and they may even think fraud is taking place. And that all means a lowering of your credit score.
9. Not enough old accounts
Those same old accounts can be a good thing though, once they’re all corrected. One or two accounts that you’ve had since you were a teenager show a complete and unbroken financial history, boosting your score.
10. Other people
If you have a joint account, a joint mortgage, or even a housemate you shared a utility bill with, it means you might be linked to them financially. If their score is bad, it’ll drag yours down too. Ending the credit agreement as soon as possible will fix it though.
11. Mistakes on your file
Some of the things in this article might be noted on your file when they’re not true – and that means they’re taking off credit score points you don’t deserve. That’s why you need to check your report often and get in touch with the credit reference agency to correct it if it’s wrong.
If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.