Silly mistakes that are easy to make that damage your credit score

Life can be busy and it’s easy to make relatively insignificant decisions about your finances that can come back to haunt you and potentially be a problem when looking to take out a mortgage or any other type of credit.

So, let’s have a look at some of the things that can cause problems on your credit report and have a detrimental effect on your score.

Your mobile phone contract

We all like a nice up to date shiny new phone, however did you know that by signing a mobile phone contract you are entering into a credit agreement? The actual handset cost is included in the contract within the credit agreement. If you default or don’t make your payments on time, this will damage your credit score and show as either late of missed payments (arrears). Tip: Always make sure you have enough money in your bank account to pay the monthly direct debit.

Credit Card payments

If you are using a credit card and forget to make the minimum payment, this will damage your credit score. The credit card company will assume you are not able to make the minimum payment and you are therefore a high risk to lend money to. Tip: Always set up a direct debit to pay at least the minimum payment each month. This way the payment will never be late and if you want to pay off additional funds, you are still able to do so.

Personal Loans

If you have a personal loan, and you’re short of funds, it’s not uncommon for some people to think the payment can wait until you’ve sorted your finances out. Whilst there may appear to be no consequences at the time even though you’ve caught up with your payments, the missed payments will be recorded on your credit report as arrears. If you try to get a loan at a later date the new lender will consider that you were late paying your previous loan and may therefore be reluctant to lend you the money. Tip: Always phone the loan company if you are in financial difficulty and see if they will come to an arrangement for future payments until you are back on track.

Credit cards

Nowadays it’s not uncommon for us to have 2 or 3 credit cards. But, having too many may not be such a good thing especially if you tend to leave a balance outstanding on them each month. Even if you are making the monthly minimum payments, having too many credit cards and loans will flag warning signs to lenders. They will start to suspect that you may not be able to manage your finances, even if they are fine. Tip: Always make sure you cancel any credit cards and close accounts of cards you no longer use

Electoral Roll

Lenders like to know who you are and where you live. They way that they do this is by checking that you are on the electoral roll which they can see on your credit report. Tip: Always make sure that you are on the electoral roll especially if you have just moved and if not, get yourself on there as soon as possible by contacting the local authority.

Not having any credit

Whilst it can seem a good idea not to have any credit, in the world of credit referencing this may be a potential issue. A lender wants to be able to see that you are able to manage your own credit and the only way to do this is to take out some. Tip: Next time you are buying a sofa, tv or other larger purchase, consider taking this on credit (even better if it’s interest free) to help your credit file especially if you don’t have any existing credit.

If you would like any advice on improving your credit file of getting a mortgage then please give me a call on 07798 687434 or email me at sue@southernmortgages.co.uk

Photo courtesy of Canva