If your credit rating has suffered, there could be many reasons to explain the drop. Although most of them are fairly easy to guess, others may remain a mystery. Until now.
When you are applying for a large purchase or loan, your credit rating will come under scrutiny as lenders consider your eligibility. Having a good income may not be enough to satisfy their checks, so you should be aware of the hidden factors that could be affecting your credit rating, and may even prevent you from being accepted for an unsecured loan.
- Frequent house moves and the electoral register
Addresses that you are linked to are listed on your credit record, and can be viewed unfavourably by lenders if you have moved house frequently in the span of a few years. Lenders will generally ask for these details when you apply for credit. Not registering to vote can have an effect too, as lenders use electoral roll information to verify your name and address. Incorrect details, being registered at an old address, or not registering to vote can impact your credit rating, so get your details correct and up-to-date.
- Irregular income
An unfixed income can make it difficult to prove to a lender that you are a reliable borrower, even if your income matches the minimum eligibility criteria for their products. Having a permanent job will make it easier when applying for credit applications, even though some providers do make it less difficult for those with low income or without fixed income to apply. Keeping your income regular and steady will improve your chances of being accepted for a credit or unsecured loan application.
- Your partners credit history
A joint application can sometimes improve your chances of getting an unsecured loan, but couples should check their credit ratings first before deciding to join them up. Any application for a financial product with a partner will automatically create a link between your financial histories. If your partner has a bad credit record, it will be reflected in your own credit rating and affect your ability to get credit. Close down any joint accounts that may be negatively impacting on your credit rating, and contact credit agencies to update your details regarding old connections.
- Multiple credit applications
Be careful about taking out too many credit applications at one time, as this may adversely affect your score. These multiple enquiries will appear on your credit report, and may make you appear to lenders as someone who is failing to get the credit that they need. You should make only one credit application at a time, and leave a space of a few months between other applications. This includes mobile phone applications; although the phone networks do not lend you money, they will do a credit check to make certain that you will pay your bills on time before they will provide you with a contract.
- Poor repayment history
Missed or late payments on your accounts will have a negative impact on your credit rating, and could stay on your record for at least three years. Regardless of the reason, lenders will have no choice but to assume that you are unreliable and a risk – and on that basis, many may decide not to lend to you. To avoid this happening you should keep up with all your credit payments, including mobile phone contracts. Making regular monthly payments will help build up your credit rating and show to lenders that you can maintain a financial commitment.
Knowing what affects your credit score will help you to avoid any actions that adversely affect it, and so have much more control over your financial situation. The better the credit score, the more favourable your terms from a lender could be. Taking these steps will help get your credit history into a better shape and build up your credit rating, improving your chances of being accepted for a more affordable unsecured loan.