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Your Money: Winning the ratings battle is crucial if you need credit

Couple having problem with bills and money.
Couple having problem with bills and money.

WITH Christmas around the corner and bills to juggle, at this time of year lots of people feel they have to turn to credit to tide themselves over.

Or, after the the Bank of England base rate increase, you might be looking to sort a new mortgage out.

Either way, if you are about to apply for credit it’s worth making sure you look in good financial shape to a lender – otherwise you may run the risk of being offered a worse rate, or being rejected altogether.

And there might be something you’re doing – or not doing – which could be damaging your credit rating.

Here, Jacqueline Dewey, managing director at credit checking service Noddle, highlights eight pitfalls which could wreck a good credit score…

Ignoring credit reports

Ignorance isn’t bliss. By checking your report regularly, you can help protect yourself from a range of potential problems and risks. Be aware of errors which could lead to you being rejected for a loan, mortgage or credit card. Make sure you check, check and check again.

Being fashionably late

Lenders respect punctuality as it highlights that you can successfully meet your financial commitments on time each month.

Looking ‘desperate’

Making too many “hard search” credit applications at once can damage your score, as lenders view it as desperate behaviour – even if you’re just shopping around. There are credit eligibility checkers which you can use without damaging your credit score.

Showing credit shyness

While it’s good to be prudent, complete credit shyness can impact a credit score and damage your chances of being accepted for a mortgage or car finance, for example, in the future.

Failing to spot identity theft

Cyber-crime and fraud are becoming increasingly elaborate, so you may not always know whether you have been targeted. However, one way to stay vigilant is through checking your credit report frequently.

If you see any information that doesn’t look correct, it’s important to investigate. While it may be a simple error, it could also be a sign of fraud.

Using all your available credit

Regardless of whether you pay on time and in full, maxing out your available funds can impact your score – as it implies that you’re too reliant on credit.

Try only using around 25% of your available credit, which may indicate to lenders that you’re minimal risk and help improve your score.

Neglecting the electoral roll

There’s more than one benefit in exercising your right to vote and it relates to your credit score. Lenders use the electoral register to check your name and address to prove that you live where you say you do.

Building up unused credit

Although there’s no hard and fast rule, for some lenders unused credit can be a red flag. They’re apprehensive that you could spend all your available credit in one day, and thus struggle to pay back the debt.

It’s advisable to think tactically about which cards you need and use, including store cards, and then make a judgement call on whether they’re really necessary.