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4 ways your credit score can affect your finances

Damage to your credit record doesn't just mean less chance of a loan or credit card - it could also affect where you live and work.

If you have a poor credit rating, potential problems might not be limited to rejected loan, credit card and mortgage applications.

Those of us who've missed repayments in the past, or even walked away from a debt, are likely to have had a note made on our credit file.

This is the document that a variety of companies consult when deciding whether to enter into a financial agreement with us.

Unfortunately, these agreements aren't limited to bank loans and cards: the consequences of a bad credit rating can be even more serious.

1. Pay through the nose for your phone

If you want the latest iPhone or Samsung phone, the most cost-effective way to get one is usually by signing up to a monthly contract with a mobile network.

But because these contracts let you make calls and pay later, they're a form of credit deal – so you’ll need a clean credit record to be accepted.

If you can't get a contract, you can still opt for a pay-as-you-go tariff.

But this'll mean you have to pay upfront for your phone, rather than getting it as part of a deal. In the case the latest iPhone, you'll probably have to pay over £500 for just the handset.

2. Miss out on energy discounts

Most gas and electricity suppliers offer customers a discount if they pay by direct debit, which makes it easier for the providers to get their cash.

But what most people don’t realise, though, is that you may not be able to set up a direct debit if you've got a dodgy credit record.

3. Harm your job prospects

Depending on the type of occupation you have, a potential employer may also check your credit file.

This is more likely if you work in financial services, for example, but checks are becoming more common across the board.

Tom Ilube, founder of credit-record company Noddle, says: 

"Potential employers need to be sure of who you are and an increasing number use credit-checking facilities to confirm an applicant's identity."

4. Lose your dream home

Landlords run credit checks on potential tenants as a matter of course these days: understandably, they want reassurance that rent will be paid on time. 

So if you have a history of missed loan or card repayments, this is likely to count against you.

For potential homeowners, mortgage lenders will check the credit records of potential borrowers.

But research from credit-record firm Experian has found that a quarter of would-be first-time buyers have never checked their credit reports.

And almost 40% are not registered on the electoral roll at their current address.

This is a key part of a credit check: any loan applicant whose address doesn't tally with electoral roll records is more likely to be rejected.

How do I improve my credit score?

bad credit uninstalling

James Jones at Experian says that people should understand it's possible to clean up a credit record.

"Remember, that your most recent behaviour counts the most and so even if you have had difficulties in the past, there's light at the end of the tunnel," he says.

You can still apply for loans designed for those with a poor credit history while actively trying to improve your profile by:

  • Ensuring that you're registered on the electoral roll.
  • Closing any dormant accounts.
  • Paying all bills on time each month.
  • Checking that any financial associations that are no longer active are removed.
  • Limiting the number of times you apply for credit.

Read our guide on credit history improvement for more tips.

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Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris

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