Four surprising factors that could be ruining your credit score

If you’re planning on applying for a mortgage, your broker or lender will use your credit score (among other things) to determine whether or not to give you that all-important, life-changing loan.

Generally speaking, a good credit score increases your chances of being accepted for a mortgage. It can also give you access to better deals at better rates, so it’s worth being as prepared as possible for that day when it arrives.

Maintaining a healthy credit file is something you can always be aware of. Simple things like checking your personal details are correct, registering to vote, staying within your credit limit and making payments on time can all help raise your score.

However, there are also a number of more surprising factors to consider that could be affecting your rating:

  • Too many applications – Every time you apply for credit, whether that’s in the form of a mortgage, a loan, a credit card, car insurance or mobile phone, it leaves a footprint on your credit file for a year. Although you need credit to build up a credit history, too many applications in a short space of time can make it look as though you are desperate and that could lead to rejections. Credit reference company Experian, for example, recommends no more than two credit applications every six months.
  • Utilities and mobile phones – Most companies now check your credit file when you sign up for a new contract, including mobile phone companies, internet providers, TV packages and other utility firms. Sometimes the company will carry out a ‘soft inquiry’ and your score isn’t affected. Or the provider could be performing a ‘hard inquiry’ which stays on your file and impacts your credit rating, without you even realising it. To avoid this, ask if they will perform a soft inquiry instead.
  • Late payments – On the subject of utilities, utility bills should be treated in the same way as a loan or credit card; failing to pay your gas and electricity or phone bill etc on time can also impact your credit rating and affect your chances of applying for a mortgage in the future.
  • Always paying in full – It stands to reason that missing credit card payments or paying late can bring down your credit score, but what’s more surprising is that being the model customer and always paying the balance off in full every month can also be a negative factor. Ideally credit card companies like customers to have some debt while meeting the minimum balance on time, every month. Likewise, it’s good to have high spending limits, but make sure you’re not maxed out across several cards.

If you are planning on applying for a mortgage, forewarned is forearmed, so it’s worth getting hold of your credit score from a credit reference agency ahead of time. This will enable you to find out your rating and see whether there is anything you could be doing to improve it.

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