The UK Credit system is very similar to other countries; it’s based highly upon your debt and repayment history. Other factors that are considered are your employment history, your continued residency, and the number of times you apply for credit or loans. However, unlike in the states; the UK credit system also looks at whether or not you are correctly registered on the Electoral Roll.
The most powerful influence on your credit score is the history of your credit accounts. New lenders look for those individuals that pay their bills on time and pay at least the minimum required amount. Missed and late payments reflect badly on your credit history and can lower your credit scores for up to one year until continued payments are made. And although your score may go up over time, in reality negative entries on your credit history can haunt you for up to six years. Another factor that plays into your credit score is the available credit you have on current accounts that are opened. If you have maxed out all your available credit from current accounts listed on your credit history; most likely, you will see your points drop. It’s important to keep the accounts current; paying the minimum, but it is just as important to keep the accounts open and available with credit.
Many UK residents are unaware that continued residence is an important factor to their credit rating. Most lenders look for continued residence for at least 3 years. Therefore, if you have relocated and have had several addresses in the last 3 years; your chances of getting a loan are slim. As well, if you are currently at a residence for less than 6 months; you will most likely see your credit score drop. There are some exceptions to this rule like going from a tenant to a homeowner.
Just as important as continued residency is continued employment. Lenders look for those that have had long-term employment. The general rule of thumb is no more than 2 varying jobs in the last 3 years; and continued employment for at least the last six months. As well, lenders will look for any time lapse when you were not employed; this too, can hurt your credit score.
Although, it’s not a bad idea to shop around for credit; it is a bad idea to apply for numerous credit accounts. Each and every time you apply for credit; it is recorded to the credit bureaus. The more applications reported in a given time period can absolutely lower your credit raking. Therefore, it is recommended that you only apply for credit once per month. Multiple credit applications in any given amount of time may appear as a red flag for lenders; and ultimately will hamper you from getting a loan or credit.
Bad credit scores are repairable, it just takes time. For those needing to improve your credit ranking, you should allow at least 6 months for any notable change to occur on your credit ranking.
