So you’ve missed a payment or two. But is that the only reason why you have a bad credit rating?
Contrary to common belief, there is no single credit score or rating that lenders and providers use when running credit checks. Depending on your provider, you may still get approved for that loan or that mobile phone contract even with bad credit under your belt. There are, however, a number of bad behaviors or practices that are known to affect credit rating.
Obviously, late payments on your bills, loans and any debts are among the top reasons for a bad credit score. When you default on a debt including your council tax, your score also gets hit. Not paying your credit card bills in full at the end of the month further affects your overall credit rating. For lenders and providers, paying just the bare minimum on your credit card bill may imply that you are currently having a difficult financial time hence the rejection.
For many people, there also comes a point when your financial situation is beyond manageable leading to consequences such as CCJs, IVAs or bankruptcy. All these also adversely affect your credit score.
When you are not being financially responsible with your liabilities, you are essentially failing to fulfill your end of the credit agreement. Your failure to stick to the agreement is bound to reflect on your credit report eventually giving you a poor credit rating.
Now you might think that if you pay your credit cards and loans on time and in full, you’re credit score is safe. That may be true because you’ll have a good credit score but you’re not always guaranteed to get approved for a loan or a mobile phone contract. This is particularly true if you only borrow short term loans which you repay on time. Lenders and providers tend to favor those with a long history of long-term and large debts because they want to make money.
If you haven’t borrowed before, expect to have a non-existent credit history which is usually a point against you. Without substantial history on your credit report, lenders and providers are going to be more hesitant when approving your application.
But regardless of your provider or lender’s decision, your goal as borrower or applicant is to practice good financial behaviors all the time. That means borrow only what you can afford, pay your bills and credit cards on time and stick with the credit agreement. In the end, those are the things that will help keep your credit score in tip top shape.