6 Surprising Credit Score Factors That Make A Big Difference

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6 Surprising Credit Score Factors That Make A Big Difference; a man smiling on the phone

Have you ever checked your credit score and it turned out to be lower than you expected?

Well, you’re not alone in this experience. 

Pay your bills on time, keep a low credit utilisation ratio and maintain a history of accounts in good standing. That’s all it takes to maintain a good credit score, right? Wrong. Although maintaining your credit score may seem simple, the factors contributing to credit scores are more complicated than you may assume.

In reality, it is very easy to hurt your credit score without realising you’ve even done something wrong. 

That’s why we’ve put together this guide to help you keep your credit score in check. In this blog, we will cover 76 surprising credit score factors that may impact your credit score negatively.

Let’s get into it!

1) Limited Credit Card Spending

With every credit card you have, there are two important numbers that agencies consider when calculating your credit score – the balance and the limit. Your credit card balance is the amount that you see on your bill every month whereas the limit is the maximum amount you are able to spend.  

While it may seem strange, if you don’t use your existing credit cards, your credit score could suffer as a result.

Furthermore, lenders appreciate borrowers who use their credit sensibly, keep within credit limits and make all their payments on time. If you never use the credit that is available at all, lenders are unsure if you will use it sensibly later on.

However, while you should use your credit cards, ensure you don’t go to an extreme and overspend. Always ensure that you keep your spending on credit cards under control to maintain a positive credit score.

2) Utility Bills

Many companies have begun to send payment records to the three big credit reference agencies. If you’re behind on any of your utility payments, not only do you risk having them turned off, but you may also be risking your credit score. 

For lenders, this practice is very useful as it gives them a better understanding of how well you are able to manage your money. 

While missing a single payment may not affect your credit score, it could affect the way a lender views you when you apply to them. However, missing multiple payments in succession will have an adverse effect on your score. That’s why, failing to pay your utilities is amongst some of the major credit score factors that could harm your score.  

3) Applying for More Credit

When you apply for more credit or a credit limit increase on a card, your lender or the card issuer may perform a hard credit check. As a result, this may temporarily lower your score.

However, there are also times when your lender or issuer conducts a soft check. In these instances, the credit request will not negatively affect your credit score.

Moreover, if your request is actually accepted, it will end up improving your credit score. This is because lenders do not appreciate seeing borrowers ‘max out’ their cards. As such, if your request is denied, your score will go down.

4) Having Little Credit Diversity

A fair credit score in the UK is often not enough, multiple other credit score factors may come into play. 

Many lenders like to see that you’re able to also manage different types of credit. What this means is that instead of just having multiple credit cards, having a car loan and a mortgage alongside your credit cards is much more beneficial for your credit. 

If you aim to take your score beyond 800, adding a different type of debt to your credit mix might be helpful. 

However, don’t start applying for different types of credit in a rushed attempt to boost your score. Instead, always weigh the costs of a loan against the benefits to justify applying for it. In most cases, it’s better that you naturally set up a diverse mix of credit over time as you require additional forms of financing.   

5) Guarantor Loans

Having a good credit score is important, especially when it comes to partners and loved ones. Acting as a guarantor for your loved one is generous as it could help them qualify for a loan they otherwise may not have gotten approved for. 

However, as a guarantor, you’re not just lending your good credit for the application, you’re also responsible for paying back the loan amount if your loved one is unable to do so.

Moreover, guarantor loans will show up on your report as if you’ve borrowed the money yourself. Consequently, by missing payments, the credit scores for both borrowers attached to the loan are negatively impacted. 

Furthermore, the debt on your credit report could also increase your debt-to-income ratio. As a result, guarantor loans are a significant credit score factor that may make it more difficult for you to get approved for credit when you need it.

6) Ignoring Your Credit Report

You may believe that checking your credit report is not among the credit score factors that impact your credit score directly. However, neglecting to check your credit report could be equally harmful. 

While uncommon, it is still possible for lenders to make mistakes when reporting your account status. In fact, some of these errors could also have a bad impact on your credit score. 

To prevent this from occurring, review your credit report regularly for any incorrect or misrepresented information. If you do find any errors, file a dispute immediately and ensure they are corrected. By doing so, you may be able to increase your score.

Choose Salad Money for Fair and Affordable Loans

If you currently have poor credit due to any of the above credit score factors, this doesn’t mean that you’ll be completely excluded from receiving any additional credit. However, it may limit your options. This is where Salad Money can help you out.

As one of the UK’s leading online lenders, Salad Money believes in providing affordable credit options to all public and private employees who suffer from less than favourable credit scores.

That’s why we use an open-banking-based assessment system to fairly assess and understand your financial situation during the loan application process.

What’s more, we are FCA-regulated and authorised, which means you can rest assured that your financial information is in safe hands.

With our “More Than Your Score” loans, you can receive the funds you need to handle any financial emergency.

To learn more about our services, click here and apply for a loan now!

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