Credit Library

Many private renters are misguided on what actually contributes to their credit score, believing things like getting married, having a better paid job, getting a parking fine, or even staying with the same bank can impact their credit score.* 

So we thought we’d lift the lid and take a look at the actual factors that could impact your credit score - both positively and negatively.

5 Key Factors affecting credit scores 

  1. Payment History

This is by far the most important. Your payment history Is a record of how you repay your debts over a period of time. And is used to judge the risk of lending money to you. The better you are at paying back within the terms set out from your agreement with the lender, the better your score is likely to be.

  1. Credit usage and utilisation 

Credit usage is also an important factor. The amount you owe on instalment loans — such as a personal loan, student loan, or credit card — is part of the equation. But even more important is your current credit utilisation rate.

Credit utilisation is the percentage of your total available credit that you are currently using. For example, if you have a credit limit of £1,000 on a credit card, and you spend £500 during the month, you will have used 50% of the £1,000 available to you. This means your credit utilisation ratio would be 50%. Most CRA’s (credit Referencing Agencies)would say a credit utilisation rate of 30% is a strategy to go for. Anything over 75% is likely to cause red flags! 

  1. Length of your credit history

This is referring to the length or age of the accounts that appear on your credit reports. Generally the longer you’ve had accounts that you’ve used in a responsible manner the higher your credit score will be. 

  1. New types of credit you apply for

If you’re making a lot of new applications for credit or have recently opened a number of new accounts, then the credit agencies are likely to view you as a higher risk. Having said that - it’s always wise to shop around - so don’t let this put you off. Plus the CRAs are getting better at understanding that people shop around and that this type of activity shouldn’t always be seen in a negative manner.  

  1. Your credit Mix

Different types of credit you have used can also have an impact on your score. So if you’ve shown you can handle loans, credit cards, retail store cards etc. then this is likely to have a positive impact on your score. But if you’ve only ever used a credit card - don’t take a loan out just to increase your mix - unless of course you can pay it back on time.   

You may also be interested in finding out how you can improve your credit score. And how you can do it without using a credit card. And if you’ve a low credit score and are struggling to find somewhere to rent - we’ve some tips to help you there too!

*Source - Canopy surveyed 2,013 18+ private renters in the UK. The research was carried out by Censuswide between 16.03.2022 and 21.03.2022.

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