There are a number of factors that can affect a bad credit score, however there are two that are of particular relevance:
Late or missed payments
Most people have a number of active credit facilities such as mortgages, credit cards, power providers and phone accounts. For the most part we pay these accounts on a regular base, often using a direct debit facility.
However, what happens when you are late making a payment or miss some payments altogether? In most cases the credit provider is obliged to inform you of outstanding payments and how to remedy the situation. In general, if the situation is not rectified within 60 days of the last bill then the credit provider does have the power to inform the credit reporting agencies and list a default against you. Some credit providers such as telecommunication companies can be particularly active in listing negative items on their customers’ credit reports. Once a listing is made it will be recorded for between five to seven years, depending on the type of the listing, and can cause you to have a bad credit score.
Once you have such a listing on your credit report, your credit score will be adversely affected, which could result in a bad credit score. Having a bad credit score could make it very difficult to secure credit in the future, which will restrict your financial options.
A bad credit score can also be the result of credit enquiries. When applying for a loan, lenders will use the data gathered from your credit history and place it into their credit models. They do this in order to make their decisions based on various credit risk factors (each lender will have their own credit decision models developed purely for their requirements). When conducting a personal credit check on you, the loan companies will be looking at your previous credit history (looking for things such as your payment record, number of other credit applications, how often you change address, whether or not you are on the electoral roll). Each creditor will use different credit scoring techniques to ascertain how credit worthy you are.
Simply by conducting a credit check on you, the loan company has already made an impact on your credit report. When a credit check is carried out, a ‘Footprint’ is left on your credit report. This credit footprint indicates which lender has conducted a search on your credit file and when the search was carried out. These credit footprints are held on your credit file for a period of five years and can negatively impact your credit rating, resulting in a bad credit score.
Clean Credit specialises in credit repair and can help you remove negative credit items such as defaults and judgements from your credit file. Through this service, Clean Credit has helped many people to restore their credit rating, allowing them to secure credit once again.