What can impact your credit score?
If you want to keep your credit score in good standing, you should be aware of the following, which could bring your rating down:
- Borrowing more than you can afford. Make sure you can meet at least the minimum repayments comfortably before taking out credit.
- Missing a card or loan payment – this one is serious, as it could be a black mark on your report for up to six years.
- Using all your available credit may indicate you’re having some financial trouble.
- Applying for any type of new credit, including cards and loans, will work against your rating.
- Not having a credit card (yes, really!). Lenders can’t decide if you’re a risk or not if you have no credit history for them to base their decision on. Making small, regular purchases on a credit card, then paying them off in full each month can be a good way to establish a positive score.
What else makes up your ‘financial fitness’?
There’s much more to your finances than the number on your credit score, with many other contributors making up your ‘financial fitness’. Take savings, for instance, which can give you some financial security by providing you with a fall back in case of any emergencies. Having this protection means you may not need to borrow money, for example, if (or when) that rainy day comes.
The other good news is that whatever you have in your savings accounts won’t make an appearance on your credit report. Applying for or opening a savings account, including making any deposits or withdrawals, won't make a difference to your credit score or alert potential lenders of your activity. Savings providers will usually only perform what’s known as a ‘soft search’ on your credit history to check your identity.
What’s more, if you take out any credit, the support of some extra money in an emergency fund could help you ensure you make the monthly repayments on time – or save you from getting into debt entirely if an emergency arises. This is important when it comes to maintaining a decent credit score and avoiding any flaws on your credit report.