12 things that could scupper your credit score - and stop you getting a mortgage
If you’re looking for a mortgage, want to pay for something in installments or get a new credit card, the lender will want to be sure they can trust you to pay them back.
They will carry out a credit check resulting in a score that determines your reputation as a borrower.
It will access information on your previous borrowing and payments, as well as other factors such as your income and whether you’re on the electoral roll.
A better score can give you access to more deals and to cheaper interest rates.
Here are the main factors which can make lenders think twice about your application:
Not being registered to vote on the electoral roll: They need proof of where you live – and it helps prove your identity too.
Making a lot of applications for credit in a short space of time could make you look short of money and a risky client.
Missing a payment: Missed payments in the previous six years will have a negative impact on your credit score.
Making late payments: Set up a direct debit from your current account to guard against this.
Unpaid utility bills: If you’re jointly named on a bill you will be seen as liable even if the missed payment isn’t your fault – so get your name on the bill and make sure it’s paid on time.
Maxing out your credit cards, even if you’re making regular payments: You’ll need to show a good amount of available credit (the difference between what you’re borrowing and your credit limit). Otherwise they might feel you’re struggling to cope.
Not having a credit history at all: You may be good with your money, but the lender has no way of knowing unless you’ve stuck to the rules of a credit agreement in the past. Taking out a new credit card or loan may hit your score slightly at first but you’ll more than make up for it by notching up regular payments back again.
Keeping unused accounts open: They all count towards your total credit limit, which the lender may feel is high enough already, even without your new application going through.
Making a mistake on your application form: Simply getting the postcode wrong could cause a delay or rejection.
Having a county court judgment against you: Try to resolve these; they won’t be on your report after six years.
Being declared bankrupt or entering a voluntary agreement: Once your Individual Voluntary Agreement (a formal and binding rescheduling of debt repayment) ends, the Insolvency Service will let the credit reference companies know. Having an IVA might prevent you getting credit. With bankruptcy, you are legally obliged to tell a lender you are bankrupt if applying for a loan/credit of more than £500. It could potentially count against you indefinitely, which is why it is seen as a last resort, and as a high risk customer you may be charged higher interest rates.
Identity fraud: Protect your identity in case someone else tries to open accounts in your name. You can see if this has happened by checking your credit report.
Plus: Regular use of ‘payday’ loans, moving house frequently, changing jobs frequently or having no landline phone number may count against you.
Three main firms – Experian, Equifax and TransUnion – compile your credit reports and you can check directly with those companies to make sure it is correct via their own websites, where there is also information on what to do if you think they’ve made a mistake.
A poor credit rating can make it harder to get a mortgage but in the end it is completely up to the lender and forms just part of their assessment. Some take a sympathetic approach but usually at a price, through higher interest rates and fees.