Throughout your life, credit scores will play a vital role in the financial products you take out. For example, when you’re applying for a mortgage, your credit report will be used to help determine whether you’ll be able to keep up with repayments and if your application will be accepted at all. The higher your credit score, the more you’ll be seen as a low-risk individual and the more money you’ll be able to borrow. It is also worth remembering every lender follows a different policy for credit scoring.
So that means even if you don’t meet the criteria of one lender, you could still be able to get credit from someone else.
However, it’s essential you find out exactly why you were turned down before making another application.
You should also be aware that too many credit searches in a short space of time could be viewed negatively by lenders.
Credit scores are given in the form of a number between 300 and 850, which is used to depict your credit-worthiness.
READ MORE: Does checking your credit score lower it?
What affects your credit score?
While the exact criteria used by each scoring model varies, these are the most common factors that affect your credit score.
Payment history is the most important ingredient in credit scoring, and even one missed payment can impact your score negatively.
Lenders want to be sure that you will pay back your debt on time when they are considering you for new credit applications.
Payment history accounts for 35 percent of your FICO score, which is the credit score system used by most lenders.
People with top-up credit scores often carry a diverse portfolio of accounts, which could include a car on finance, credit cards, student loans, mortgages and other products like them.
Credit score modelling considers the types of accounts and how many of each you have, which is then used as an indication of how well you’ve managed a wide range of products.
Credit mix accounts for 10 percent of your overall FICO score.
The number of credit accounts you’ve recently opened, as well as the number of hard inquiries lenders make when you apply for credit, account for 10 percent as well.
Too many accounts or inquiries can indicate an increased risk, and as such, hurt your credit score greatly.