Top 5 Factors which Influence Your Credit Score

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Securing a business loan can prove difficult, and your credit score is going to play a crucial part in the success of your application. As an established business loan brokers in Chelmsford, we value all levels of credit scores, high or low. It’s important to note that there are several factors which can cause your score to fluctuate, which we will explore in today’s blog post.

Constant Credit Application

In the finance industry, credit scores are highly relevant and are an important stepping stone towards securing a loan. However, if you have found yourself submitting several applications for credit, especially within a short space of time, this could damage your credit score report. Before making an overall lending decision, all lenders will be required to carry out credit checks. We will assist in this process by ensuring that we will place your application with a lender best suited to your personal and business circumstances to avoid unnecessary searches being carried out.

Hard search: These are typically carried out by commercial finance brokers and the lenders themselves. They will influence your score, as well as negatively impact your credit. For example, if you apply for credit 3 times in one month, and if one of them is declined, this will cause the score to be decreased.

Soft search: These searches do not impact upon your credit score and in comparison, to hard searches, they leave a footprint upon your record that is visible only to yourself and not to a finance company or anyone else who is requesting a check on you. For instance, when carrying out a check on yourself, this will allow you to check your credit score before physically applying for a loan.

Reliability with Address and Electoral Roll

When lenders are approached by potential customers, they’re automatically going to check their client’s previous and current address history. If this person has lived in the same residence for a prolonged period of time, this indicates stability and permanency. By not moving into several properties, this presents to the lender that they reliable and stable and therefore trusted to pay back their loan.

In regard to the electoral roll, lenders will also view this as another sense of solidity. In order to vote in political elections, you have to be signed up to one address. If this is the case for you, it will positively impact your credit score and record, illustrating to lenders a state of financial stability.

Defaulting on Credit Payments

Paying your debts back on time is a vital part of having an excellent credit score. If you’ve failed or missed payments time and time again, the lender can then decide whether to put the account into default. Once these payments have been missed, they will remain on your records for 6 years and therefore, if you’re looking to secure a loan after defaulting, then you may find it difficult. If you are experiencing difficulties repaying your loan it is advisable to speak with your finance broker or the lender themselves as they maybe able to assist with a payment plan.

Previous Credit History

If you’ve been renowned to have bad credit history, this will also impact your ability to secure loans in the future. Particularly when hard searches are involved, if you have been declined and you’ve been refused a credit card or loan, they will leave footprints on your record. When carrying out obligatory checks on credit for customers, this will highlight any possible threats that have been presented through failing to proceed payments and maintain monthly payments.

Credit Limitation

Dependent upon your history with credit cards and loans etc, the percentage of credit that you are utilising towards your maximum limit will also influence your credit score. When applying for credit, the lender is going to study information based on your previous credit limits and how these have escalated over the years. Initially, when managing your repayments, it’s important to factor in the amount you are deciding to borrow. For example, if you’re fulfilling the whole percentage of your limit, commercial finance brokers and lenders may perceive this as negative. Using 50-75% of your credit limit will give a negative effect on your credit score. If you are utilising more than 75% this will likely have an even more significant effect on your credit score.

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