What can affect my credit score?

When you’re looking for a short-term loan or a long-term loan, knowing what can affect your credit score can be significant and help you to get the upper hand when searching for the right lender for you.

Bad credit can be a poor start. While bad credit loans are possible, if you can it is best to avoid bad credit wherever possible and keep your credit score as positive as possible to improve your chances of being approved for a loan.

Here are a few things that can contribute to bad credit and have an adverse effect on borrowing money for a loan, even a bad credit loan.

1. Failing to pay on time

This is a massive issue for most lenders and banks especially dislike seeing negative balances and delayed payments on any borrowed money. Your repayment history makes up a fair chunk of your credit score and so lenders will use it to get an idea as to how capable you are of repaying debts and how responsible you are.

Missing a payment, making a late payment or failing to pay entirely all have significant negative impacts on your credit score and can contribute to a bad credit rating.

2. Declaring yourself to be bankrupt

By far one of the most significant problems for poor credit ratings and the largest contributor to a bad credit score, declaring bankruptcy should be avoided at all costs if possible. When you declare bankruptcy, you are informing all potential lenders that you are incapable of repayments and that you cannot be trusted with a personal loan.

Not only that but bankruptcy will stay on your credit record and negatively impact your credit score for years to come which, even if you recover your financial situation, could potentially ruin any future attempt at lending including getting a mortgage with your lousy credit rating.

3. Shopping around for credit to avoid bad credit

This is another huge red flag for most lenders. If you have been taking out loans from multiple lenders, or if you have taken out several cards, or even if you are just applying to multiple lenders or for several cards from a single bank, this chain of applications can damage your credit rating.

Every rejected application will impact your credit rating having the potential to lead to bad credit even if you are experiencing no credit problems. Furthermore, most lenders will take multiple applications in a short time frame to be a sign that you are expecting financial difficulty to come knocking on your door, or that you are already experiencing it and that makes you a huge risk to a lender.