What Factors Affect Your Credit Score?
Your credit score is influenced by several parts of your credit history. Different credit reference agencies use different scoring systems, so the number you see with one agency may not match the number shown by another.
Lenders do not make decisions from the score alone. They may also look at your income, existing commitments, repayment history, recent applications and whether the new borrowing appears affordable.
Your Payment History
Repayment history is one of the most important parts of a credit file. Missed payments, defaults, County Court Judgments, insolvency records and other serious problems can make future borrowing more difficult.
One late payment does not automatically lead to a default or block you from credit for a fixed period. The effect depends on what was reported, how recent it is, how serious it was and the lender’s own criteria.
Our How to Improve Your Credit Score guide explains practical steps that may help over time.
Your Credit Utilisation
Credit utilisation is the amount of revolving credit you are using compared with your total available limit. For example, if you owe £2,000 across cards with combined limits of £10,000, your utilisation is 20%.
High utilisation can suggest that you are relying heavily on credit, especially if several accounts are close to their limits. Lower balances may help, but there is no single percentage that guarantees a better score or approval.
Your Address History and Electoral Roll
Being registered on the electoral roll can help lenders confirm your identity and address. A stable, accurate address history also makes applications easier to verify.
Moving home frequently does not automatically make someone a poor credit risk, but inconsistent or missing address information can delay checks or make identity matching harder.
What Is a Hard Credit Search?
A hard credit search is a full search of your credit file carried out when you make a formal application for credit. It may be used for loans, credit cards, car finance, mortgages and other borrowing.
The search leaves a record on your credit file that other lenders may be able to see. It does not show whether the application was accepted or declined, but it does show that a formal application took place.
How Can a Hard Search Affect Your Credit Score?
One hard search is unlikely to transform a strong credit file into a poor one. Several searches within a short period can have more impact because they may suggest that you are applying repeatedly for credit.
The effect varies between credit reference agencies and lenders. There is no universal rule that every hard search reduces a score by the same number of points.
How Long Does a Hard Search Stay on Your Credit File?
A hard search normally remains visible on your credit report for a period of time before dropping off automatically. The exact display period can vary between credit reference agencies.
You do not usually need to request removal unless the search is incorrect, duplicated or linked to suspected fraud.
Hard Search vs Soft Search
A soft search is generally used for eligibility checks, quotations, identity checks or when you review your own credit report. Soft searches are not normally visible to other lenders in the same way.
A hard search is usually linked to a full application and can be seen by lenders reviewing your file.
Our guide How Do I Get a Loan Without Being Credit Checked? explains the difference in more detail.
Can Shopping Around Create Several Hard Searches?
It can if you submit several full applications rather than using eligibility checkers or quotations first. Before applying, check whether the lender or broker will use a soft or hard search at that stage.
Using an eligibility checker does not guarantee approval, but it may help you avoid unnecessary full applications.
The Number and Age of Your Accounts
Lenders may consider how many credit accounts you already have, how long they have been open and how they have been managed.
Closing an old account can reduce your total available credit and increase your utilisation percentage. That does not mean you should keep every account forever, but it is worth checking the wider effect before closing one.
Your Existing Debts and Affordability
A good credit score does not automatically mean a new loan will be affordable. Lenders may compare your income with rent or mortgage costs, bills, existing repayments and other commitments.
Use our Budget Calculator before applying to see whether a new repayment would fit comfortably.
What Does Not Normally Affect Your Credit Score?
Your credit file is not based on everyday purchases such as groceries or a night out. It focuses mainly on credit accounts, repayment information, public records, searches and identity data.
Another person’s poor credit history does not affect yours simply because they live at the same address. A financial association may matter if you hold joint credit, a joint account or another linked financial product together.
Before Applying for a Loan
Check your credit reports for errors, avoid making several full applications close together and make sure the repayment appears affordable.
Read What Credit Score Do You Need for a Loan? and visit our Bad Credit Loans page for more information.
Badger Loans is a credit broker, not a lender, and does not charge customers to submit an application.
