Credit reports provide an overall credit score, a tool that lenders use as a basis for all of their credit application decisions.Each time you apply for credit, whether that’s a loan, a mortgage, a store card, a credit card, or even a mobile phone contract – your credit history is examined, as lenders make a judgement on whether to lend you the money, or agree to the contract.
In a time of increasing inflation, many of us are being forced to make important financial decisions with regards to where we put our money, and make changes to how we spend and how we save. Many of these decisions could have serious impacts on your credit score, so it’s important to consider the future implications before moving money around.
When interest is low and inflation is high, savers are often among the worst hit. Families earning low or moderate incomes may also face a situation in which their income cannot keep up with the cost of living – and it’s in these cases that it’s important to consider the impact of any actions on future credit scores. You can view your credit score using a service such as Experian CreditExpert, which provides guidance on how to keep your credit score as positive as possible.
If you’re taking out more credit cards
Your credit report details how much credit you have available to you – not just how much you’re using. This means that if you have a whole selection of credit cards, each of which you’re only using part of, the actual total credit you have available to you will appear very high. This can have a negative impact on your credit score.
If you move house
A single move is unlikely to have a major impact, however, frequently changing home or moving from rental property to rental property is another factor that will be recognised on your credit report. In general, lenders prefer to loan money to those who are relatively settled, and aren’t bouncing from place to place. You can help your case by putting yourself on the electoral role – a tool used to verify identity, as well as showing that you have committed to a particularly location enough to consider it worthwhile registering yourself there.
If you’re remortgaging your home, or applying for personal loans
Each time you apply for credit, this is recorded and can impact on your credit score. Of course, it makes complete sense to show around for the best rates if you are looking for a loan, however, it’s important ask each lender that you apply to to register this as a ‘quotation search’ and not a ‘credit application search’ on their records. This ensures that your credit report stays completely clear, and there isn’t any impact on your credit rating.
So, before you make any significant financial changes to account for the rise in inflation, consider the future implications this may have for your credit needs, and review your current credit report to ensure it’s up to date and accurate.