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Credit Reports: Reasons for a Poor Credit Score

Bad Credit History

Your credit history accounts for about one third of your total credit score. CCJ and defaults can indeed have a negative impact on your credit score, but so can missed payments and late payments. Negative entries will remain on your credit file for a period of six years. The impact of missed payments and late payments will reduce over time, however. If you have been making payments on time for at least a year, then the negative entries will have a decreasing influence on your overall credit score.

At current address less than three years

Your credit score will be much higher if you have been at the same address for three years or longer. If you have had several addresses in the last three years, this will have a tremendous impact on your credit score. If you have been at your current address for less than six months, your credit score may be adversely affected. Living abroad for an extended period can also have an adverse effect on your credit score, as creditors do not like when they are unable to check up on where you have been living for an extended period.

Lack of employment continuity

You will be most attractive to a lender if you have had the same job for several years. If you have had two employers in a three-year period or have changed jobs for more money, then you will probably not experience any problems. It is better, however, to have been in a new job for a few months before applying for credit, as lenders occasionally ask to see recent pay slips when you apply for a loan. As continuous employment is something that employers like to see, periods of unemployment between jobs, or having had three or more jobs in the last three years, will have an adverse effect on your credit score.

Multiple Credit Applications

Each time you apply for credit, it is recorded on your file. If you have several different applications in a short period of time, this will have a negative impact on your credit score. In a word, it will make it look as though you are desperate to receive credit. If you only apply for credit once every month or two, this will not have much impact on your credit profile. If you have recently sent in a batch of applications and been denied, it is a good idea to wait for six months before applying once again. This gives you time to look over your credit file and see if anything is there that should not be.

No or New Bank Account

If you have been with the same bank for a number of years, your lenders will award you maximum points. If you have only recently opened up a bank account, your credit score will be much lower. If you do not have a bank account, this is even worse.

Not on the Electoral Register

If you are not registered to vote at the address on a credit application, there is a greater chance of rejection.

Same surname and same address with bad credit

Anyone who has your last name and lives at your address will have their credit record taken in to consideration alongside yours. This can have a positive or negative impact on your credit rating. Even if the person happens to be unrelated to you or has moved out before you moved in, then this can have an adverse effect on your overall credit rating.

Bad Neighborhood - Red Lining

Creditors feel that if you live in a neighborhood where everyone has bad credit and CCJs, then the chances that you will be a similar type of person are great. This is a result of pure statistics. In theory, this should not be used to deny you credit, but it can nevertheless have an adverse affect on your credit.

“Red Lining” refers to when services are denied or provided at an increased rate owing to the racial or social determination of your neighborhood. This practice is illegal. In the event that you suspect this has happened to you, then report the company in question to Consumer Direct.