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Keeping your credit score in check shows great financial responsibility and it also offers a whole range of benefits. When applying for loans, mortgages, car finance, credit cards and even mobile phone contracts, a better credit score can get you a better deal compared to those with bad credit scores. If you check your credit score regularly and suddenly realize that your score has dropped, don’t panic. There are a few reasons why this can happen.  

It’s no surprise that missing payments or making late repayments is one of the fastest ways to decrease your credit score. One of the biggest factors that potential finance lenders look at is your payment history and your ability to meet deadlines. If you are struggling to make your repayments one month; it can be better to make a late repayment than not meet the payment deadline altogether but after 30 days, you will probably see an even bigger dent in your credit score. You can increase your credit score by always making payments on time and in full.  

When you apply for credit, lenders will usually perform a credit check to make sure you will pay back your loan. A hard search credit check is an in-depth look at your credit file which is also recorded on your credit file. Making multiple applications using a hard search check for finance in a short space of time can negatively impact your credit score. However, this doesn’t mean that you can’t shop around. For example, if you have previously been refused car finance and want to get the best deal possible, you should stick to soft credit searches which don’t leave a mark on your credit file and doesn’t affect your credit score.  

County Court Judgements, defaults and declaring bankruptcy all have a massive impact on your credit score. They can stay on your credit score for up to 6 years and seriously affect your chances of getting finance or credit. CCJs and defaults are usually issued when you fail to meet repayments. A default is when you miss a payment, and the lender decides that you aren’t going to pay it back. A CCJ is a court order which forces you to pay a debt and is usually put in place when a debt is defaulted. Declaring bankruptcy is usually the last option for people who can’t pay their debts off as lenders can use assets such as your home to help pay off your debts.  

When you take out finance with someone such as on a joint car finance deal, you will then become financially linked on your credit file. A joint finance deal can be beneficial if you have bad credit during the application process and increases your ability to get approved. However, if you no longer have active credit with someone who has a low credit score, you should consider removing them from your credit file. Their bad credit score could be negatively affecting yours too.  

Finance lenders like to see traceability, and this can be tricky to prove if you move home a lot or don’t have a fixed address, indicating that you may be more likely to not pay back your loan or credit. If you have recently moved home, you should make sure that you credit file is accurate and up to date and you can also help lenders verify who you are by registering on the UK electoral roll.  

Having high levels of debt can negatively affect your credit score. You should try to lower your credit utilization to keep your credit score healthy. It is recommended that you use under 50% of your available credit limit to boost your score and develop good money habits. For example, if your credit limit is £1000, you should only use up to £500 of it. If you are constantly maxing out credit cards, overdrafts and store cards, lenders may think you can handle any more credit.