Your credit score is represented by a three digit number and is held by credit reference agencies such as Experian and Equifax. It’s available to banks and other financial institutions to help them assess the risk of lending money to you. It’s not the only factor they use, but it is one of the most important ones.
Therefore, it’s important to make sure that your score is as good as it can be. A poor credit score will make it more difficult for you to get a mortgage, although it is not impossible, particularly if you seek the advice of an experienced bad credit mortgage broker. You may have to pay a higher interest rate and be prepared to put down a larger deposit.
Adverse credit can also affect your eligibility for credit cards, car loans, and any other type of consumer goods that you want to buy using a finance deal, such as furniture or tech devices. You may find it more difficult to rent a property. It can even affect your chances of being offered certain types of job, especially if they involve finances or senior management.
However, many people are not aware of what can lower or boost their credit score. There are five main factors that are used to determine your score, with some given more weight than others. The largest one at 35% is your payment history. This means that if you have any missed or late payments on your credit cards, bills, or loans, it will impact your score.
The more severe the problems with payment history, the worse your score. One or two late payments on a phone bill will have much less impact than defaulting on your mortgage, for example. County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs), Debt Management Plans (DMPs), and bankruptcies will have the most serious consequences.
A further 30% of your credit score is based on how much of your available credit you are currently using. If you owe large amounts over multiple cards or loans and you are always near to your credit limit, this can affect your credit rating even if you do pay the money off on time.
Around 15% of your credit history is based on the length of time you have been financially active. Therefore if you are still living at home with your parents, and do not have any loans or bills to pay on a regular basis, this can result in a lower credit score.
A further 10% of your score is calculated by taking into account the amount of requests you make for credit, whether or not they were successful. If you have made multiple requests within a short period of time, this can negatively impact your credit score.
On the other hand, 10% of your credit score is based on the range of credit you use. For example, if you have only ever had one credit card, and never bought a car or furniture on finance, this can lower your credit score because the lender may feel that there is not enough evidence of how well you will cope with the extra responsibility.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
Back to Blog
Create Finance Limited is an appointed representative of Mortgage Advice Bureau (Derby) Limited which is authorised and regulated by the Financial Conduct Authority.
Create Finance Limited. Registered Office: 35 Friar Gate Studios, Ford Street, Derby, Derbyshire, England, DE1 1EE. Registered in England Number: 09582938.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The actual rate available will depend upon your circumstances. Ask for a personalised illustration.
We may receive commission that will vary depending on the lender, product or permissible factors, The nature of any commission model will be confirmed to you before you proceed. Create Finance Ltd are a credit broker, not a lender.