7 min read

The factors affecting your credit score: part two

Frankie Jones
3 May 2019

This article is the second in our three-part series looking at the factors that impact your credit score. Check out part one and part three to get a better understanding of the behaviours that might be bringing your score down without you even realising.

Factor 4: Credit utilisation

How much of your credit limit you use is known as your credit utilisation rate. For example, if your credit limit is £1,000 and you use £500 of it, your credit utilisation rate will be 50%.

How this affects your score

The ideal credit utilisation rate is 30%. So, if your credit limit is £1000, try not to use more than roughly £300 at any one time. Using too much of your available credit limit - regardless of what your limit is - will increase your credit utilisation rate, which could have a negative impact on your score. This is because lenders could assume that you’re dependant on credit and that you may struggle to pay back money you’ve borrowed.

What to do about it

Try to keep your credit utilisation below 30%. If you really need to buy something and it’s likely to max out your credit limit, it might make sense to spread the amount over multiple cards to minimise the impact on just one card. Alternatively you might like to consider using a card with a 0% purchase period, or for particularly large purchases it might be worth taking out a loan.

If you find yourself regularly using more than 30% of your credit limit, you could ask your provider to increase your limit. This might be more realistic than simply spending less (although that will certainly help, if you can afford to).

Factor 5: Multiple hard searches

Having too many hard searches on your credit report within a short space of time could cause your score to take a hit.

How this affects your score

A hard search is when a lender looks at your credit report and score, usually after you’ve applied for credit with them. They do this to decide whether you’re a reliable borrower, and, unlike a soft search, a hard search will leave a mark on your report and likely affect your score.

Applying for credit and, in turn, obtaining a hard search on your report, is likely to cause an initial dip in your score. But as you continue to borrow and manage your debt responsibly, you should see your score go up again.

The problem starts when you have too many hard searches in a short period of time. This is because you risk looking like you’re desperate for credit or that you’re struggling to manage your debt to anyone who looks at your report. Not only could this damage your score, but it might mean you’re offered higher interest rates when you apply for credit as you’ll be deemed an irresponsible borrower.

What to do about it

Try to avoid applying for too many financial products in a short space of time. If you really need more credit, could you ask your lender to increase the credit limit on your existing credit card? This is a better alternative than simply going over your credit limit whenever you need to buy something.

We suggest checking your eligibility for a product before you apply, so you know how likely you are to be accepted and don’t waste an application on something you’ll only be rejected for. You can see your eligibility for a range of products, including credit cards and loans, in your ClearScore offers.

You can see who’s performed a hard search on your report in the ‘Searches’ section of your ClearScore report.

Factor 6: Up-to-date address

A mismatch in your actual address and the one showing on your credit report can have a significant impact on your credit score.

How this affects your score

Credit reference agencies, like our partner Equifax, use your address to match you with your credit report. This means any discrepancies in your address could lead to inaccurate information showing on your report, which could harm your credit score.

Because Equifax uses your address to help verify your identity, it’s important your address is correct and up-to-date across all of your financial accounts, like your current account and mobile phone contract. Even if you use the same address but in a slightly different format each time, this can still have a negative impact on your score if the addresses appear inconsistent. This is because you won’t be shown your full credit history due to a mismatch in addresses.

Check out our article for more information on how your address affects your credit score.

What to do about it

First, check your credit report to make sure your current address is displayed correctly. You can do this in your ClearScore account, and remember to update it if it’s wrong. Learn how to correct your address here.

If you move house, notify lenders (like credit card and mobile phone contract providers) of your new address and update it as soon as you can on ClearScore - crucially, in the same format. Don’t forget to register to vote at your new address; this will make it easier for credit reference agencies to verify you and could give your score a little boost at the same time.

Lastly, it’s a good idea to check your credit report after you’ve moved. Your report should be updated automatically, but mistakes happen so it’s worth taking a look (this is also a good opportunity to give the rest of your account and report a once over to check everything’s as it should be). Make sure you fix any issues as soon as possible by raising a dispute with Equifax to prevent your score from taking a hit.

If you missed part one of our factor series, you can find it here. To learn about the last three behaviours affecting your credit score, head to part three.

by Frankie Jones

Frankie Jones is ClearScore's in-house Copywriter. 

ClearScore exists to make your finances simple.
We offer a free service where you can handle everything to do with credit in one place. In your ClearScore account, you can see your credit score and the full details of your credit report. Your credit cards, mortgages, mobile phone contracts, loans, overdrafts and utilities all on the record. Our goal is to make ClearScore as simple, calm and straightforward as possible. Money is stressful enough.