What Affects Your Credit Score?
Whether you’re thinking ‘why is my credit score low?’ and want to improve it, or better understand how it’s worked out, there are many factors which can affect your credit score. There are also a few myths surrounding what affects your credit rating that should be cleared up to provide a better understanding of the process and put you in the best position for applying for a Likely Loan or other form of credit.
What Affects Your Credit Rating?
Even though there is no universal credit score, all the main credit reference agencies use similar factors and mark them against their own criteria when working out your score. The most common factors to affect your credit score are:
- Stability: Whether you are on the electoral roll and how long you have lived at the same address demonstrates this and provides assurance that you are who you claim you are.
- Age of accounts: This also shows stability and assurance, while demonstrating previous trust from another lender. Older accounts will have a more positive impact on your credit score.
- Number of accounts: Many take into consideration how many of your accounts have balances too, with it being better to have more zero-balance accounts.
- Missing payments: Not paying a bill or missing a deadline will have a negative effect on your score. The amount of missed payments you are allowed before you default changes between lenders.
- Credit limit usage: Using too much of your total or a single line of credit could damage your score. Often this is when over 50% is used.
- CCJs, IVAs and Bankruptcy: County Court Judgement (CCJ) and Individual Voluntary Arrangement (IVA) information is on public record and will be added to your credit report.
- Mistakes on your report: From incorrect names and addresses to fraudulent activity if someone else has taken out credit in your name, it can affect your score.
Does Checking Your Credit Score Affect It?
Other popular questions include ‘does checking your credit score affect it?’ and ‘do student loans affect credit score?’ Checking your credit score yourself does not impact it, even though an inquiry goes on your report every time someone looks at it.
Some lenders, including us at Likely Loans, will allow you to check your eligibility for a loan without it impacting your credit score. This is what’s known as a soft search. Each soft search application you make will be visible to you on your credit report, but not to other lenders. It’s important to remember that all full credit applications that you make will affect your credit score.
Student loans do not affect your credit score and won’t show up on any report. Changing bank account shouldn’t impact it either, unless you open up a new credit card at the same time as opening a new savings account. Bank overdrafts will only affect your credit score if they’re not resolved in a timely manner.
With a better understanding of what affects your credit score it should be easier to take any action you need to improve it.
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