We all know how important our credit score can be when applying for a credit card, and most of us know the basics of what could hurt our credit score. Things like missed payments, not being registered to vote and too many credit card applications are widely known to leave you with a less than pristine score.
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But the following are three surprising things that might you might not be thinking of, but could hurt your credit score.
The 30% rule
You may think that having one credit card and using that solely for your spending may be a good thing for your credit score. But if your balance goes above 30% of your credit limit you may actually be hurting not helping your score.
When credit rating agencies are conducting a credit check they will look at your credit utilisation. This is how much of your credit is available and therefore are you showing good borrowing practices. The general rule is that if you keep your balance to below 30% of your credit limit then you will not hurt your credit score, but if your balance creeps up to between 50% and 70% of your credit limit then this will show up as an ‘amber flag’ on your credit report. If you are using more than 75% of your total credit limit then this will be classed as a ‘red flag’.
Don’t be tempted therefore to take out multiple cards in order to spread out the balances. This in itself could impact your score, as credit rating agencies will look at all credit accounts you have available to you, and whether or not you are in a position to pay off all forms of borrowing.
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Length of accounts
While there may be campaigns and incentives from banks and building societies tempting you to switch your current account, particularly following the introduction of the Current Account Switch Guarantee in 2013, this could actually have an impact on your credit score.
Credit rating agencies will look at the length you have held your accounts as part of the criteria they assess for your credit score. If you chop and change frequently this could be seen as unreliable and therefore negatively impact your score. They will be looking for accounts that have been well-managed for a long period of time, so even if you were just taking advantage of some of the switch incentives on offer, the unseen cost could be to your credit score.
This seems obvious, but it could also be something easily overlooked. Make sure that all your accounts are under one name. You may be like myself and be called Katherine, but go by the name of Kate. However, if some of your accounts are under Kate Anderson and some are under Katherine Anderson then it could impact your score. Lenders are looking for reliability and multiple account names could cause confusion.
Credit ratings agencies will also check the electoral roll to see if you are who you say you are, therefore make sure any financial accounts (banks accounts, direct debits, credit cards, mortgages, etc.) match the name you have registered to vote with. Any discrepancies could lead to misunderstandings and a lowering of your credit score.
If you’ve followed good credit practices like these, then you may well qualify for some of the top-rated credit card offers for 2020
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