What can damage your credit score?

Having a good credit score is something which is desirable to all of us. It helps us when we want to access financial assets such as payday loan or a mortgage. Having a credible credit score makes one less of a risk to lenders and therefore, one would not have to stress about the possibility of being rejected since lenders use this score to actively assess whether they wish to grant you a loan.

Loan providers will also use your credit score to assess the overall terms of your loan, such as the rate charged and the amount they are willing to grant you. If you need to get a loan quickly and do not have time to improve your credit score, it is possible to get a payday loan with bad credit.

The highest credit score in numbers is 999, whilst the lowest is 0. Your score can go up and down in-between these numbers easily and there are various things that you can do to damage or improve your score. In this guide, we will be focussing on the things that can actively damage and lower your credit score, and what you can do to avoid and/or fix these things. If you have already found you have a bad credit score at present, do not worry – this can soon be changed.

Having too many accounts open


If you have a number of credit card accounts open, this can damage your credit score quite significantly. These days, it is very easy to take out a credit card, maybe too easy! However, please do not think just because it’s easy you should take out numerous credit cards – it can have truly devastating effects on your credit score.

The reason it is damaging to your credit score is that you appear to have access to large sums of money through various means, which paints you as a potentially reckless spender and for a provider, you will be seen as a risk. Since you clearly have thousands of pounds at your whim, lenders tend to be reluctant to do business with you as your finances are too spread out and you have the potential to fall into massive amounts of debt.

If you have more than 3 personal credit cards, which is the absolute limit advisable, you should consider closing the accounts which you rarely use – they are causing more damage than it is worth.

Having hard searches on your credit file

If you ever request credit, whoever the lender is will take it upon themselves to looking into your credit history in order to gain an understanding of your financial habits. Whilst having a few of these searches on your credit file will not do any damage, having too many hard searches can cause your credit score to fall significantly. For the record, a hard search will stay on your credit file for a period of 12 months usually.

Do not let this put you off requesting credit when you really need it. Most places have systems in place which will treat comparison shopping for a loan as one search rather than multiple searches because it is understood you are not trying to attain various forms of credit.

Only request credit when you really deem it necessary. If you just do it on a whim regularly, your credit score will not be in your favour as you will be seen as unreliable by loan providers.

Having a bad repayment history


It goes without saying that having a bad reputation for repaying what you owe is obviously going to damage your credit score. If you find yourself falling behind on payments, you can certainly expect to see a drop in your credit rating and as a consequence have a much harder time in obtaining financial assets.

To avoid this, aim to pay off your credit card in full each and every month. To make your life easier, set up a direct debit linked to your current account which will simply take the amount that you owe from there in order to pay your credit card bill off.

If it has been loans that you have struggled to pay back in the past, plan better next time. How much can you really afford to pay back, taking into account the interest rate? Do not take out more than you have means to pay back in full when it comes down to it.

Daniel is a loans expert based in London and has been working in the payday loans industry since 2010.