Five credit score killers

Couple looking at houses for saleIf you want to have a chance of being accepted for competitive mortgage, credit card and loan deals, it is vital to ensure that your credit score - which lenders use to help them decide whether or not to accept you as a customer - is as high as possible.

Here, we highlight five things that you need to avoid to do so.

1. Failing to keep your personal information up to date
Even if you earn a large salary and have a flawless payment record, failing to have the correct personal information on your credit file could result in you being refused for market-leading credit card, loan and mortgage deals.

It could be that you are not listed on the Electoral Roll, or that you have forgotten to change an old address on one of your accounts.

Either way, it is important to ensure that such mistakes do not ruin your chances of being able to borrow at competitive rates.

You can do this by checking your file with the credit reference agencies.

2. Missing a payment
Everyone makes mistakes. However, it is vital to stay on top of all your payments, from your electricity bills to your credit card repayments, if you want to maintain a good credit score.

There are tricks you can use to help with this. When paying credit card bills, for example, the safest method is to set up a Direct Debit to repay the full – or a set – amount each month.

You could also set up an alert on your mobile phone to remind you when large payments such as your mortgage are due to come out of your account.

3. Defaulting on a credit agreement
Missing a payment is bad enough for your credit score, but completely failing to repay your debts is even worse.

If you are struggling to keep up with your minimum payments, changing your repayment schedule is therefore preferable to defaulting and you should contact your lender about this as soon as you realise you will be unable to meet your commitments.

If you are really in trouble, debt charities such as the CCCS can also help you to come to an arrangement with your creditors under which you make affordable payments.

This will be noted on your credit file, but is less damaging than simply missing a raft of payments because you cannot afford to service your debts.

4. Receiving a County Court Judgement
If you fail to take action of the kind described above when you are unable to pay your debts, you risk receiving a County Court Judgment (CCJ), which will be entered on the Register of County Court Judgments.

This will have a very negative impact on your credit score, to the extent that it will be very unlikely for you to qualify for any form of regular credit or finance - other than those aimed at sub-prime borrowers - for at least six years.

If you pay the full amount owed under the CCJ within 28 days of it being registered on your credit file, however, then you can apply to have it removed from your credit file.

Payments made after that time will result in the CCJ remaining on your credit file but being marked as "Satisfied", which will also help to lessen the negative impact on your score.

5. Going bankrupt
Bankruptcy is one of the solutions open to people with severe debt problems. For those who owe many thousands of pounds, it can seem like a godsend as it allows them to leave behind the horror of being chased for money they do not have.

However, going bankrupt has some serious disadvantages too. As well as potentially forcing you to sell your home and any other major assets to help pay off your creditors, going bankrupt also means that you will find it impossible to borrow again for many years.

Even though bankruptcy itself only usually lasts up to 12 months, the related restrictions can be extended for up to 15 years.

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