We all know that failing to pay debts or utility bills can damage our credit score, and cause problems for us in the future. However, there are some less-well-known things that can do almost as much damage, so it's important to get to grips with these five unexpected things that can affect your ability to borrow money, get a mobile phone, move into a new home or even to get a new job.
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1. Sharing finances
If you have applied for credit with your partner, such as a joint credit card or a mortgage, and certain utility bills, you will be linked to their credit history. If your partner has a poor credit score, it can affect your rating too.
Tom Eyre, founder of Credit-Improver.co.uk, which helps people build credit histories and improve credit scores suggests that if you're concerned, "Keep your financial associations as separate as possible. If you break up with a partner, close your joint accounts and then contact the three main credit reference agencies to request what's called a "notice of financial disassociation". This will effectively split your finances again, so you aren't damaged by their reckless approach to their finances.
2. Avoiding credit
You might have financially breezed through life with a steady income and no debts. As a result, you think you would be seen as a responsible borrower. However, Eyre warns: "The confusing thing about credit scores is the most financially careful people can have low scores. Those who've never had credit have no history to prove they can manage repaying it on time, and so lenders will be reluctant to lend to them."
He says that in order to develop a good credit score, it's important to apply for appropriate credit products and demonstrate your ability to handle credit. This may mean, for example, taking out a credit card and then setting up a direct debit to pay it in full and on time every month.
3. Multiple applications for credit
While you shouldn't avoid credit, it is possible to go too far. Eyre warns: "Applying for numerous credit products in a short space of time gives the impression you are in financial difficulty. A 'hard' credit inquiry is actioned every time you apply for a credit card, pay monthly mobile contract, TV package, store card or car finance – to name a few – which means it will be filed and recorded by credit reference agencies." As a rule, he says, don't do more than three credit applications per year if you're trying to improve your score.
4. Lots of aliases
To guarantee you improve your credit score, Eyre says it's best not to be known by more than one name. In some cases married couples may use their married names at home, and their former names at work. However, he warns: "Being known by multiple aliases is going to make a creditor wary about your application. Make sure the details held about you are accurate. Multiple identities will be flagged as a fraud warning and makes you look like you have something to hide."
5. Fault in the system
Finally, it's worth bearing in mind that while they are often highly effective at managing your credit score, the three main credit reference agencies do make mistakes sometimes, and even small errors can impact your score.
The only way to fix this is to check your credit reports across all three agencies with a fine-tooth comb, as the information they keep on you differs slightly.
If you are falling foul of one or more of these lesser-known rules, it's worth getting your credit report to check what effect it has had - and taking steps to rectify it. Your score can have an enormous effect on your life - from whether you can get a mobile phone contract, to whether your landlord allows you to move in. It's therefore important to know what can affect your score, and take steps to improve it whenever possible.