7 credit score killers: what affects your credit score negatively?

This week we’re talking about credit score killers, from what affects your credit score negatively (and what doesn’t affect your credit score at all) to what you can do to start repairing your credit score if it’s taken a bit of a hit.

If the thought of checking your credit score leaves you feeling a little like this…

… then don’t worry, you’re not alone.

When you first start being mindful of your money, your credit score can seem like a scary, complicated thing with rules you don’t really understand.

But, when you really get down to basics, credit scores are quite simple. In a nutshell, they’re just a calculation of how likely you are to repay debt based on your past behaviour of borrowing and repaying money.

Think of it like this: credit scores are a little like a set of scales. There are actions that help improve your credit score and actions that negatively affect your credit score — we call those the credit score killers. A good credit score is when the positive actions outweigh the credit score killers.

And while it isn’t a quick process, building and repairing your credit score is all about making sure that you take as many actions that you can to improve your credit score.

Now, if you’ve ever read the Bamboo blog before, you’ll know we’ve talked lots about ways to improve your credit score, so today, we’re going to focus on the things that negatively affect your credit score, AKA the credit score killers AKA the things you want to avoid.

(Side note: Does the phrase Credit Score Killers sound like a hip-hop group to you? Credit Score Killaz!)

Credit Score Killers #1: Late payments

Missing a payment on a credit card or loan repayment might not seem like a huge deal — and it’s certainly easy enough to do — but a record of that missed payment will stay on your credit file for 6 years and could have a knock-on effect on your credit score.

If you have a habit of missing the odd payment here and there, it might be worth thinking about setting up an overdraft with your bank — even if it’s just a small one. While overdrafts can have their downsides, they can also act as a buffer against missed payments and little dinks and dents on your credit score.

Credit Score Killers #2: Defaulting on a debt

Defaulting — also known as not paying off a debt — is bad news for your credit score. In fact, defaulting is one of the biggest credit score killers because it tells the lender that you’ve consistently struggled to repay debt in the past and will probably do so again in the future.

However, if you’ve defaulted on a loan, you do still have a few options to help repair your credit score:

• Repay the debt ASAP:  As soon as you pay off what you owe, the default will be marked as satisfied on your file, which looks much better to lenders.
• Provide an explanation: Sometimes you can provide an explanation to your default explaining why it happened — illness or redundancy for example — that may demonstrate that the default wasn’t part of a pattern of behaviour, but a one-off.
• Wait it out: As time passes, your default has less and less of an effect on your credit score.

Credit Score Killers #3: Getting a CCJ

A CCJ — or County Court Judgement — is essentially a letter from the Courts demanding that you pay a debt you owe (usually after a series of defaults), so it’s no big surprise that CCJs are one of the worst credit score killers around.

In fact, if you get served with a CCJ, it can have a huge effect on your credit score and make borrowing money or taking out credit very difficult for up to six years.

However, if you do get a CCJ, don’t panic. If you can pay off the debt within a month, then it won’t be recorded on your credit file and won’t affect your credit score.

If that’s not possible, like with defaults, then it’s a good idea to pay it off as soon as possible so it’s marked as “satisfied” on your file. While any kind of CCJ is one of the worst credit score killers around, a satisfied CCJ is far, far better for your credit score than an open CCJ.

Credit Score Killers #4: Not being on the electoral roll

We talk about this a lot here on the Bamboo blog and that’s for good reason: it’s a weird, unexpected quirk of the credit score system that catches a lot of people off-guard. It’s the silent credit score killer, if you will.

So, why does being on the electoral register affect your credit score?

Well, the answer actually makes more sense than you’d think: lenders use it to check whether your information (like name and address) is legitimate. If you’re not on the electoral register, it makes it harder to have faith that you’ll be able to repay your debts.

But this one is super-simple to fix. Just go to Gov.UK and register. Easy!

Credit Score Killers #5: Taking out cash on a credit card

Another sneaky credit score killer for you here!

Did you know that whenever you take out cash using your credit card, the withdrawal is recorded on your credit file?

Withdrawing cash with a credit card usually implies money troubles, which can be a red flag for lenders, especially if you’ve already got a few other red flags (like missed payments, for example).

To avoid this, always make sure you withdraw money with your debit card unless absolutely necessary. And, if you can’t, try purchasing what you need on the credit card instead!

Credit Score Killers #6: Mistakes on your file

Did you know that a recent study showed that around 10 million adults in the UK have found errors on their credit files? And these errors aren’t just typos or little errors, they’re mistakes that can affect your credit score.

But how can you find and remove these pesky credit score killers if you have them?

Firstly, go to ClearScore and sign up for a free account. From there, you’ll be able to see your credit report (and your credit score) for free.

However, because there are three credit reference agencies, you’ll also need to get your credit files from the other agencies too. That means signing up for a CreditKarma account — or Totally Money or MoneySupermarket — and repeating the same process and paying £2 to get a statutory report from Experian.

(It’s a bit of a long process, we know. But it’s more than worth it!)

Once you’ve got your credit reports together, have a look through. If you think there is a mistake there — perhaps a late payment you made on time or an application, you didn’t make — get in touch with the provider or creditor responsible for the error.

From there, you’ll have to provide evidence that proves they’ve made a mistake but, if they agree it’s an error, they’re legally obliged to remove it from their records in 30 days, giving your credit score the boost it rightfully deserves. (However, it might take a bit of time for your credit score to refresh!)

Credit Score Killers #7: Applying for lots of credit in one go

The final credit score killer is a big red flag for lenders: applying for lots of credit in a short space of time.

Even if your credit score is OK, applying for lots of credit in a short space of time sets alarm bells ringing for lenders because it suggests that you’re either in the midst of — or at least expecting — financial difficulties.

Otherwise, why would you be frantically applying for credit? (You may not actually be frantically applying, but that’s how it looks on your file.)

If you find that you’re being refused credit, resist the temptation to apply for more until you’ve read our article on what to do after being refused credit. (It’s handy to know, trust us!)

Have you been making any of these credit score killing mistakes? If so, don’t beat yourself up. Personal finance can be tricky! Instead, why not take a look around our blog? It’s chock-a-block with tips, tricks, and advice to help you get to grips with your money, patch up your credit score and on the road to a debt-free life.