What Impacts Your Credit Rating?

May 12, 2018 7:04 pm

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It is important to understand what impacts your credit rating so that you can improve your score and maintain a good rating once you reach this stage. Your credit rating will tell lenders whether you are a credible person to lend to or not. This will determine your chances of being eligible for financial products, such as a mortgage, as well as the sort of rates and benefits you will be offered. With that in mind, read on to discover more about the different factors that influence your credit score.

Whether or not you make repayments on time – This is one of the most important factors when it comes to your rating. It is vital to make sure you never miss a payment, whether it is a catalogue payment, a credit card payment, or your contract mobile phone bill. If you do, this will show on your account for six years, and so it is really difficult to come back from. You should consider a debt consolidation credit card if you are struggling to make all of your credit card payments on time. This will consolidate all of your debts into one place so you can pay off a manageable amount every month.

How much of your available credit you are using – Let’s say you have £7,000 of credit available to you via different credit cards. If you are currently using £6,600 of this money, it will have a negative impact on your credit rating because you are using a high percentage of the credit you have available to you. If you have £15,000 of credit available, and you are using £6,600, this will not have as much of a negative impact, even though you owe the same amount of money, because it is a lower percentage. Therefore, it is worth asking to increase your credit limit and do not close accounts once they are paid off.

The maturity of your accounts – The average age of your accounts also makes a difference. If the average age of all of your credit accounts is 33 months or more, this will have a positive impact on your score. This is why you need to be mindful of opening too many new accounts.

The highest amount of credit you have been offered on your cards – Finally, the higher the amount of credit you have been offered, the less of a risk the lender views you, and so this has a positive impact on your score. If you only have one credit card and the limit is £450, this will have a negative impact because it shows you have not been trusted with a large sum of money.

Hopefully, you now have a better understanding as to the key factors that have an impact on your credit score. You can use this information to make sure you maintain a good credit rating so that you are accepted for any financial products you require in the future.

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