Top Factors on which your credit score is calculated

When you’re attempting to put together a debt management plan, it’s critical to understand your bad credit rating and how it can impact the various credit products that may be available to you.

After all, improving your credit score = better interest rates, and a wider choice of debt consolidation products – both of which can go some way toward improving your financial outlook. Which is exactly why we put together this little list of factors that impact your credit score…

  1. Your repayment history

In an ideal world you would have met all your repayments on time and in full. However not many can lay claim to never having been late in paying a credit card or bill. Unfortunately however, these can all impact your credit history, especially if they reach default stage (e.g. you miss three or more months’ worth of repayments). All of these things can quickly lead to a bad credit rating, especially defaults.

  1. The types of accounts you’re using

Be wary of what forms of credit you use, as some forms of borrowing can appear as ‘warning signs’ to lenders. These include high-interest products designed for individuals with a bad credit rating. Examples of such products include:

  • Payday loans
  • Logbook loans
  • Credit cards designed for bad credit ratings
  • Doorstep loans
  1. The amount of credit you are using and the amount of credit that is available

Credit utilisation ratio is extremely influential on your credit score. Credit utilisation ratio is the amount of credit you are using versus your revolving credit limits (e.g. your credit cards and overdrafts).

For example, if you have:

  • one overdraft of £10,000, of which you’re using £5,000
  • one credit card of £1,000, of which you’re using £500

Your Credit utilisation ratio would be 50%. You should aim for never using more than 30% of your available credit at any one point in time, as anything above this can appear to lenders to be irresponsible borrowing.

  1. A good mix of credit products

Those with a good credit rating have a diverse mix of products with reasonable credit terms. For example – they have an overdraft, credit card and personal loan – all of which have a perfect payment history.

  1. How long you’ve held your accounts

Holding the same bank accounts or credit cards for a long period of time can demonstrate a good standing with your creditors. In contrast, a long line-up of closed accounts that have suffered from late and defaulted payments won’t bode well for your credit rating. 

  1. Negative information

Asides from late and defaulted payments, insolvency accounts, collection accounts and CCJs will all create a bad credit rating – far more so than missed, late or defaulted payments.

Losing the fight against debt management is an incredibly lonely place to be, especially with a bad credit rating that weighs heavy on your shoulders.

If you need to find a way out of debt, National Debt Help are here to support you. Talk to us today about whether an IVA may be right for your financial circumstances. Call us on 0800 002 9051, or send a message via our contact page and we can call you back.

 

 

 

 

*An Individual Voluntary Arrangement (‘IVA’) is subject to the customer meeting qualifying criteria and gaining creditor acceptance. Monthly IVA payments include fees and may differ to the example provided, based on the assessment made of your own personal circumstances – these fees will be clearly explained to you in writing by your IVA company. Debt write off amounts are subject to creditor acceptance and vary by individual customer based on their own financial circumstances, and are applied upon successful IVA completion.

Substantiation example, Someone owes £60,000, they pay £100 over 60 months which equals £6000, write off amount would be £54,000 which is 90% of total debt level. Upon submitting your details on this website we will pass your details to one of our approved partners as this website does not give any advice.

Free debt counseling, debt adjusting and credit information services are available from the Money Advice Service.

National Debt Help
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