What Can Damage my Credit Rating?

Written by on November 1, 2012 in Money - No comments | Print this page

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What many people do don’t realize about credit ratings are that each lender will have a different set of factors on which they calculate your viability as a customer, that’s right, we used the word “customer” and we used it on purpose! Lenders are in the business of money lending, because they stand to make some kind of profit in it and so each lender will have a different type of customer that will result in profits for them. Lenders are not interested in lending money and being repaid before they can profit from having lent you the money in the first place. There are, however, some universal tactics at all lenders tend to look out for when assessing the viability of a new debt customer and today we are going to go through the key ways of damaging your credit rating.

1.) You’re not on the electoral register

Being on the electoral register means that you are a UK citizen who has an address,  meaning that you are to a certain degree stable, but more importantly: you can be found if you go missing.

2.)  You’re not working

No income from you, no repayments for them – it simply does not make sense to lend money to someone who can provide no viable means to pay back what they have borrowed. As well as not working, being in a new job, being self-employed or switching jobs regularly will also negatively affect your credit rating.

3.) Missing or late payments

If you already have some form of debt in the form of credit cards, loans or mortgages then it may actually prove your credit rating if you have been keeping up with your repayments. Keeping up with payments on existing debt shows at that you are a good money manager, and a good customer! Missing payments, late payments however, show that you are not a good money manager and will therefore negatively affect your credit rating.

4.) Multiple applications

Every time you apply for credit in the form of a loan, a credit card or any other form of debt, and you are refused: the refusal is recorded. Although long term being rejected is not that big of a deal, being rejected multiple times in a short space of time will reflect badly on your credit rating and shows desperation. So if you are applying for credit in some form, try to apply every week of every two weeks instead if applying to more than one in a single day order to protect your credit rating.

5.) No credit history

If you have never borrowed, then you have never repaid and this makes you a risk as there is no information for the lender to go on when assessing the level of risk you pose as a customer. If you have never borrowed, but think you may need no borrow in the future, then getting some form of credit in the form of a credit card and repaying loyally and faithfully will build up a positive credit history for you, making you a more viable option for lenders in the future.

This is a guest post.  Ben is a Guernsey finance expert and often writes about how to manage your money. He has a wide knowledge of Guernsey insurance and is always happy to help.

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