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What Can Affect Your Credit Score Negatively?

Do credit scores really matter? 🤔 Yes, they do. Credit scores are essential for financial institutions so they can better assess the level of risk of loan applicants when it comes to lending them money. Your credit score may differ depending on the credit reference agency so it’s good to know the preferred agency of your lender so you’ll know which one to check. It’s also beneficial for you to know what factors can affect your credit score so you can avoid them. Let’s take a look at what’s bad and what’s good for your credit score. 


What to Avoid to Maintain a Good Credit Score

When you apply for a loan, lenders are going to check your credit score as well as your credit history to have an idea of your financial behaviour. The following are some of the things to avoid so you can maintain a good credit score. 

Setting Up New Accounts

Whenever you open a new bank account, it’s going to knock off a few points from your credit score. However, this is not something to worry about because it would only be temporary and you can gain those points again. What’s important to keep in mind is to not do this too often because your credit score will definitely suffer and may not have enough time to bounce back. 

Reaching Your Credit Limit

Credit cards are not bad for your credit score. In fact, if you use them responsibly, you can demonstrate to lenders your ability to pay back what you owe. Credit cards only become a problem if you max them out. Lenders would see this as you being too over-reliant on your cards or that you’re in a difficult financial situation. 

Multiple Applications for Credit

Whenever you apply for a loan, the lenders are going to perform a hard search on your credit report. This, in turn, will lower your credit score. If you only applied for one and it was successful, your credit score will bounce back when you make on-time payments. However, if the lender declined to give you a loan and then you immediately applied for another from a different lender, it’s going to make your credit score worse. It’s better to wait and work on improving your score first before you reapply for a loan. 

Late or Missing Payments

If you miss a payment, it would look bad on your credit history and would negatively affect your credit score. If you miss a series of payments, then the lender will record a default on your credit report. This record can stay on your report for up to six years and it will be much more difficult for you to apply for credit during that time. Missing payments won’t just decrease your credit score but it will also affect your ability to get credit. 

Borrowing Beyond What You Can Afford

Before applying for a loan or car finance, it’s vital that you really evaluate your financial situation. How much can you realistically afford? Remember that loan agreements can last for a number of years and you’re going to have to make monthly payments for them.

If things go bad for you financially, can you still afford to pay them? Know your worst-case scenarios. In the event that you cannot pay off your loan, you might get a Debt Relief Order, an Individual Voluntary Arrangement, or a County Court Judgment. These will be included in your credit report and can stay there for many years, making it difficult for you to get a loan or even open a new bank account.

What Can Help Improve Your Credit Score?

Register to Vote Using Your Current Address

Lenders use the electoral register to confirm your identity and your address information. If you’ve moved to a different residence, register to vote using that address so that your information can also be updated. 

Check Your Credit Report for Errors

Before you apply for a loan, see to it that the details in your credit report are all correct. Check your name, address, and transactions that might be incorrect. If there are transactions that you don’t recognise or are inaccurate, immediately report them to the credit reference agency so that they can check them.

Make On-time Payments

This might be too obvious already but it’s still important to mention that making on-time payments help your credit score a lot. To ensure that you can pay on schedule, see to it that you only borrow what you can afford. You may even set up automatic direct debits so you’re sure to never miss a payment. You can do this for your mobile phone bills, credit cards, and even utility bills. All of these can help in improving your credit score. 


Credit scores are important, especially when you are applying for a loan or car finance. There are many ways to improve it but the most basic thing to remember is to know how much you can afford to borrow. This way, you won’t have trouble making payments on time. Also, take note of the things you can avoid so as not to affect your credit score negatively. Continue to read more about how to increase your credit score so you can further improve it and get better loan deals in the future. 

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