15 Things That Could Impact Negatively On Your Credit Score

I was involved in a study last year with icount Money which revealed most of us don’t understand our credit score and what affects it.

I’ve done quite a few articles on how you can build your credit score, so today I thought I’d give you an indication of what affects it negatively.

First of all, if you don’t fully understand how your credit score works don’t worry, you’re certainly not on your own as the financial education we receive in this country is, well, pretty pathetic really.

This list is full of things you should absolutely avoid doing if you want to build, or maintain, a healthy credit file.

Paying late

Many of my friends and family assumed that as long a bill was paid, you could get away with paying a bit late without it affecting their credit rating.

In actual fact, thirty-five percent of your entire credit score is made up from your payment history and consistently paying your bills late will damage your score.

Setting up a Direct Debit is the easiest way to make sure you don’t forget to pay your bills on time.

Not only that, many providers, such as energy firms, will offer you a cheaper deal if you agree to pay this way.

If you’re setting up a Direct Debit to pay your credit card bill but want to make a contribution rather than paying the full amount, set up a Direct Debit for the minimum payment.

If you are able to pay more than the minimum, pay it manually with your debit card.

I would always recommend you pay more than the minimum whenever possible.

Not paying at all

One that I think it is safe to say everyone is aware of.

Ignoring payments is worse than paying late.

If the bill you’ve been ignoring is a credit card bill for instance, you could end up having the account charged off.

Having an account charged off

If your creditor doesn’t feel confident you will pay back what you owe on your credit card bill, they could charge off your account.

This account status on your credit file can seriously impact your credit score.

Having an account sent to collections

If you don’t pay your bills, your creditors may send your account to a third party debt collection company before, or after charging off your account.

A collection status on your credit file shows that a creditor gave up chasing you for payment and had to hire someone else to do it.

Not good if you’re looking to obtain credit in the future.

Defaulting on a loan

A loan default is similar to a charge off.

Defaults on your credit file show potential lenders that you have failed to keep to your obligation to pay back the loan.


Bankruptcy will seriously damage your credit score.

Look for alternatives before going down this route if the worse has come to the worse and you need help by using a debt solution to pay back your debts.

Having your property foreclosed

If you fall too far behind on your mortgage payments your mortgage provider could foreclose on your home.

The late payments will also impact negatively on your credit score and would make it difficult for you to obtain mortgage loans in the future.

Getting a judgment

This is poison for your credit score.

A judgement shows that not only did you avoid paying your bills, the court also had to get involved in order to make you pay back your debt.

While both impact negatively on your credit score, a paid judgment is still better than an unpaid one.

High credit balances

Credit utilization is the second biggest factor to determine your credit score.

Having high credit balances compared to your credit limit increases your credit utilization and will decrease your credit score.

Maxed out credit cards

If your credit card is maxed out, your credit utilization is 100% and will lower your credit score.

Closing credit card accounts that still have a balance

By closing a credit card account with a balance, your credit limit drops to £0, while your balance remains the same.

This makes it appear as if you have maxed out your card and lowers your credit score.

Closing credit cards with available credit

If you have credit cards with some balance left, closing them increases your credit utilization.

Applying for credit several times

Credit checks make up 10% of your credit score.

Making several credit applications over a short period of time will cause your credit score to drop and makes you appear desperate to other potential lenders in the future.

Keep applications to a minimum.

Having one type of credit

Mix of credit is worth 10% of your credit score.

Having only one type of credit, for instance a credit card, can impact on your credit score.

This usually happens when you don’t have much credit history on your credit file.

Check out the related articles below for ways to build your credit score and improve your creditworthiness.

Have any of these mistakes ever impacted on your credit score?

Pin for later

There are some costly mistakes you should avoid to build or maintain a great credit score.

Related Articles:

20 No Fuss Ways To Build Your Credit Rating [INFOGRAPHIC]

How To Be A Pro At First Time Credit Applications

How Your Relationship Can Affect Your Credit Report

How Much Of Your Credit Limit Should you Use?

10 Horrible Mistakes You’re Making With Your Credit Card

Which Very Common Debt Isn’t On Your Credit File?

Thinking Thrifty

Thinking Thrifty

David Naylor is the editor of the Thinking Thrifty blog. An award winning personal finance and lifestyle blogger, he shows how it is possible to live extremely well for less.
Thinking Thrifty
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