10 reasons you could hurt your credit score

Something as simple as being on the electoral roll could be more beneficial to your credit score than you think

10 reasons you could hurt your credit score

Your credit score is very important. It helps to determine if you will be eligible for credit cards, other loans, and mortgages. It not only helps to know your credit score—it’s also useful to know the pitfalls of a bad credit score, too. Here are 10 reasons you could hurt your credit score.

Late or missed payments

An easy way to hurt your credit score is by repeatedly making late payments or missing payments. The reason for this is that your payment history makes up 35% of your credit score, so by regularly making late credit card payments you will undoubtably damage your credit score. To preserve your credit score, you must remember to always pay your credit card bills. Completely missing payments, on the other hand, is even worse. By doing so you are in danger of having your account suspended.

Declaring bankruptcy

Declaring bankruptcy will, of course, negatively impact your credit rating. It will devastate your credit score because it is an extreme measure, remaining on your record for seven years. Prior to filing for bankruptcy, you may be better off seeking consumer credit counselling or other alternatives. Another route that is similar to declaring bankruptcy and will also negatively impact your credit score is using an Individual Voluntary Arrangement, or IVA, a repayment agreement that is reached when a borrower is unable to repay their debts to the lender.

Being the subject of a County Court Judgement (CCJ)

You do not have to be too concerned about a County Court Judgement, otherwise known as a CCJ, if you repay the money you owe promptly. In the event that you are owed a County Court Judgement, you should pay the total amount within 30 days and be sure to request a certificate from the court showing that you repaid the debt. Failing to do so will impact your credit rating for six years. You can always ask for your statutory credit report by visiting Callcredit, Experian, or Equifax if you are concerned there has been confusion and a CCJ was included in your credit history.

Not being on the electoral roll

Your credit report will inform the information on the electoral roll. Your electoral details are recorded in your credit report after you register to vote, making it easier for lenders to confirm your personal details, such as your name and address. Being on the electoral roll will increase your credit score.

Only paying the minimum amount each month

Paying more than the minimum amount each month means you will spend less of your money on interest and, just as importantly, improve your credit score. For this reason, it is the best practice to pay just a little more than you normally would each month.

Using all your available credit every month

Using all your available credit every month will also hurt your credit score. It is, for this reason, the best option to choose a credit card that has an appropriate credit limit, fees, and interest rates, for your budget and your lifestyle. By choosing the right credit card, you will be able to stay on top of your balance limit and your repayments, making you more attractive to credit reference agencies when deciding your credit rating.

Applying for credit too often

Applying for credit too often might be a good indicator to lenders that you are not financially responsible. Simply put, multiple credit applications will likely negatively affect your credit score also. And it does not matter if the credit applications are successful, either, since every application records as a hard search on your report. Rather than making multiple credit card applications, instead apply for ones that you are eligible for.

Because credit inquiries make up 10% of you credit score, applying for credit too often in too short of a time will force your credit score to drop. Therefore: do not apply for credit too often.

Setting up new accounts frequently

Setting up new accounts should not lower your credit score in the longer term. Setting up new accounts frequently, however, will mean your credit score will not have time to recover. 

Being close to your credit limit

Being close to your credit limit—such as maxing out your credit card(s) or using your whole overdraft—will cause lenders to think you are in financial trouble or are too reliant on credit.

Borrowing more than you can afford

If you borrow more than you can afford, you may be forced to get Individual Voluntary Arrangement or a Debt Relief Order. Another possibility is that your lender could reclaim the cash you owe them by applying to make you bankrupt or having a County Court Judgement issued against you. In either of these scenarios, your credit score could be negatively impacted in a way that could make it hard for you to borrow money in the future.