How Did I Get a Bad Credit Score?

As part of our everyday life, we build up quite a portfolio of credit facilities. Between juggling a credit card, mortgage, phone bill, and power providers, it can sometimes go underestimated how important it is to pay these bills on time. In fact, a large majority of people pay off these loans on a regular basis through their direct debit facility. But it doesn’t leave a good impact if they miss or fail to make such payments, as it leads to a bad credit score.

A lot of our clients come to ask and ask, “How did I get a bad credit score?”. Here are some examples of what directly impacts your credit score and how you can avoid these common issues.

Missed or Late Payments

There are some cases where credit providers or financial institutions are responsible for reminding their clients of outstanding payments and how they can avoid it. If an individual does not pay within a period of 60 days from the payment of their last bill, credit provider has a power to intimate the credit agencies and list a case of default against you.

Listing a Default

There are some credit providers who actively report the defaults to agencies. An example can be a telecommunication company that actively lists negative items on a credit report of their clients. Once a default entry is recorded, it stays there for 5 to 7 years. The number of years varies on the basis of the type of listing. This leaves a negative mark on a credit report of a person and leads him or her toward having a bad credit score.

Difficulty in Securing Debt

Having a bad score is not a good thing. It makes it difficult for a person to apply for a loan or to be able to get credit in the future. As a result, you start running out of financial options.

Credit Enquiries

Another reason for getting a bad credit score is credit enquiries. When you apply for a loan, lenders tend to use the information collected from your credit history. They incorporate that information in their credit models so as to base their decision on multiple credit risk factors. It is important to note that every creditor develops his own credit risk models according to his requirements.

Running a Credit Check

When credit providers run a credit check on individuals, they look at their personal credit history in order to see the following:

  • Payment records of a person
  • Number of other credit applications
  • Frequency of changing address, and
  • Whether a person is on an electoral roll

However, techniques for assessing an individual’s credit history vary from one credit provider to another. Every lender uses his own credit scoring techniques to assess your credit worthiness.

Credit Check Leading to Credit Footprints

Running a credit check affects the credit reports of individuals. Carrying out this check leaves a mark on your credit file. It is also known as “credit footprints”. These footprints show, which creditor has conducted a thorough search of your report, and the period during which, it was carried out. It is not good for your credit rating as it leaves a mark on your report for a period of five years. Having a negative effect on your credit file also leads to a bad credit score.

Not Tracking Your Credit Report

Moreover, it is very important to keep track of your credit report. For example, over the years, you might stop keeping records of your file when you change your job or move to a new place to live. This can lead to losing track the details of your credit history and can adversely affect the process of your future credit applications.

Every individual must check his or her credit report once every two years in order to stay up to date with their credit standing. This will enable a person to quickly fix any errors made by him or her. For example, an individual can direct bills to his new mailing address, improve his positive credit information, and he can also make an inquiry as to whether his cancelled account is paid in full or not.

These are some of the reasons why a person gets a bad credit score that leaves a negative impact on his report. It is crucial to pay these amounts in full and on time so as to avoid the complication of securing loans in the future.

Chat to our team of experts at Hunter Galloway on 1300 088 065 or email Joshua at [email protected] now!