If your credit score is lower than you expected, it is rarely because of one dramatic event. Far more often it is a handful of ordinary things, most of which are fixable, and several of which have nothing to do with how much you earn or how carefully you budget.
Working out which ones apply to you is far more useful than worrying about the number itself. This article looks into the 5 reasons why your credit score is low and offers practical tips on how to begin restoring it.
Table of contents
1. Missed or late payments
Payment history carries a lot of weight with every agency. A late payment gets recorded, and if an account falls far enough behind it can be marked as in default. TransUnion’s guidance is that a defaulted account stays on your report for six years from the date it defaulted.
Six years sounds brutal, and these marks do not disappear on request. What generally helps is that recent behaviour tends to carry more weight than older behaviour, so a steady run of payments made on time starts to matter more as older marks age.
2. Balances sitting close to the limit
How much of your available credit you are using matters, not just whether you pay. A card sitting near its limit month after month tends to read as strain, even when every payment is made on time.
Many people find that bringing balances down, or spreading spending across available credit rather than maxing out one card, changes how that part of the picture looks. Closing an unused card can sometimes work against you, because it removes available credit and pushes your usage percentage up.
3. Not being on the electoral roll
This one catches a lot of people out, and it has nothing to do with money. Agencies use the electoral register to confirm you live where you say you live. If your current address is not on it, lenders may struggle to verify you, and an application can be declined over what is essentially an admin gap.
If you have moved recently, or never registered, you can do it free at https://www.gov.uk/register-to-vote in a few minutes. You can stay on the register while opting out of the open version, which is the copy used for marketing.
4. Several applications close together
Every formal credit application leaves a hard search on your file. Experian’s guidance is that most hard searches stay visible for around 12 months, while TransUnion records searches for up to two years, another reminder that the three agencies do not work identically.
One or two searches is unremarkable. Several in a short space of time can read as someone under pressure, whatever the real reason. Where a lender offers an eligibility check that uses only a soft search, many people find it helps to use that first and then apply once, rather than trying several lenders in a week.
5. Joint accounts and shared products
A joint mortgage, joint loan, joint current account or joint credit agreement creates a financial association between you and the other person. From that point, a lender assessing you can take their credit history into account, because you are jointly responsible for that debt.
This is worth understanding rather than fearing. Splitting a household bill in one person’s name does not create an association. A joint credit agreement does, and it usually stays until the agreement ends and you ask the agencies to remove the link.
What to do if something on your file is wrong
Errors do happen. A settled account still showing a balance, a default you do not recognise, an address that was never yours. You have the right to challenge anything inaccurate, and it costs nothing.
Raise a dispute with the agency holding the incorrect information:
- Experian explains disputed and incorrect entries: https://www.experian.co.uk/consumer/guides/notice-of-correction.html
- Equifax sets out its dispute process: https://help.equifax.co.uk/EquifaxOnlineHelp/s/article/HowcanIdisputeinformationonmyEquifaxCreditReport
- TransUnion explains raising a Notice of Dispute: https://www.transunion.co.uk/consumer/credit-report-help/what-is-a-notice-of-dispute
Raising a dispute is free. The agency then investigates with the lender that supplied the data, and MoneyHelper’s guidance is that this should not take longer than 28 days.
If the agency does not resolve it, you can escalate to the Financial Ombudsman Service at https://www.financial-ombudsman.org.uk, which is free to use. You will normally need to have complained to the business first and given it a chance to respond.
Your next step
Look at your report with those five factors in mind and note which ones apply to you. Most people find it is one or two, not all five.
That short list is the thing worth acting on, and every item on it is something you can work through in your own time.
