From qualifying for a home loan to securing a loan for a car, your personal credit score is the key to unlocking loans and other financial products. Many times we’re told about the things we should be doing to increase our credit score: making payments on time, ensuring we’re only financially linked to financially sound people and keeping credit accounts active are all sound ways to positively impact your credit. But what’s not discussed often enough are the possible negative factors to watch out for.
So what are negative credit factors to keep in mind?
Late or missed loan payments
- Late or missed payments stack negatively against your credit and can hurt your chances of higher limit or new account approvals. It’s also important to remember Buy Now, Pay Later (BNPL) repayments. Some BNPL issuers report repayment history to credit institutions, but not all. We recommend you reach out directly to your BNPL issuer with any questions on how repayment might affect your credit.
Using too much of your credit limit
- Though it seems counterintuitive, if you consistently use too high of a percentage of your issued credit, your score will be negatively affected. For example, if you have a £1,500 limit on a credit card and consistently utilise say, £1,100, your score will likely go down in response to your high percentage of use.*
Closing and opening credit accounts
- Many people are surprised to learn that opening new accounts or closing credit accounts you’re not using can negatively affect your credit. This is because the length of time you’ve had accounts contributes to your credit score. It’s generally a good idea to weigh the possible impacts when considering a higher credit limit or closing an account.
When opening a new account there may be both positive and negative effects to consider. Opening a new credit account may lower your overall utilisation percentage, or the new account could skew the age of your credit too young and have a negative impact. Both possibilities are important to consider before requesting new credit lines or increased limits.
Routinely checking your credit score is a simple way to catch unexpected changes to your report and monitor positive or negative trends. We’ve made it simple to track your credit score from the Kroo app. It takes moments to set up and the Kroo credit reporting feature won’t impact your credit score. Open the app and click the credit score button to get started today!