Your credit history is incredibly important when it comes to such things as getting a new car, taking out a loan or getting a mortgage on your potential new home. Having a good credit history, and by extension, a good credit score, is the key to achieving all of this. However, whether you’ve already discovered you have a bad credit score, or you’re just aiming to protect the position you’re in, it’s understandable to want to avoid things that could damage it. With this in mind we’ve uncovered some surprising factors that could affect your credit rating for you to keep an eye out for.
Unpaid Utilities and Phone Bills
Most people tend to treat some household bills as less important than others, and not paying your utility and phone bills might be a surprisingly damaging factor for your credit score. Credit lenders look for a good history of paying off all bills, as this indicates how reliable you may be when it comes to repaying future credit that you take out. Not keeping up with payments of a bill you’re currently disputing will also harm your credit score, as will any unpaid fees that you didn’t consider particularly important. So make sure you pay that electricity bill on time; setting up a direct debit is a good safeguard against late payments.
Not using your card
There are few worse things you can do with a credit card than failing to keep up with your minimum payments, but if you don’t use your credit card at all this isn’t great for your credit rating either. Some credit card companies will mark your card as ‘inactive’ if it remains unused for a certain period, and in some cases may even close the account altogether. While it absolutely makes sense to close accounts you don’t use and will never use again, this could affect your credit utilisation rate. This is the ratio of unused credit limit you have compared to that in use, and which covers all the credit accounts you have.
For example, if you have three credit cards, have used all the balance on one, half on another and none of the third then you are effectively using half of the credit you have available to you (if all the credit card values are the same). If, however, the third credit account is closed this would indicate that you are using three quarters of your available credit, which makes your credit usage look worse than it is.
Looking to get set up with a new phone provider? As part of the sign-up process, some companies will run a credit check that leaves a search record on your file before agreeing to take you on as a customer. However, if this is something they will plan on doing, they will have to let you know before they do it as they need your permission. Having a number of searches on your credit record in a short period of time can hurt your credit rating, so it’s better to shop around for the best deal before you choose a provider to sign up with.
Using ‘finance’ on anything
0 per cent, “buy now, pay later” financing sounds like the perfect deal; you get the expensive thing you want now, but can pay for it over time. Sometimes you won’t even need to start paying the loan back for a year! However, a financing plan like this could make it appear that you are high risk, as you have a large sum of credit tied to your name which won’t get smaller any time soon. Because you don’t pay anything back on this purchase for a long time you effectively have a maxed-out loan attached to you, which doesn’t look great.
If you avoid these things you’ll be off to a good start; just make sure you remember to pay off your minimum payments every month and don’t miss a date!