Answers to common questions around the things that impact your score:
When does my credit history start?
You credit history starts with your first credit enquiry. This is usually triggered by an account application for which you have provided consent for a credit check. It might be for a credit card, it might be applying for a utility account in your name, or a cell phone account.
How does having a personal loan impact my credit score?
Applying for any type of credit, whether it’s a personal loan, mortgage or credit card will generally result in a credit check being made against your credit file. This may negatively impact your credit score. A new law, which came into effect on 1 October, 2019, means that lender such as Harmoney can now make a "quotation enquiry" on your credit file. This means we can give you a quote on your loan terms before you complete a loan application. This quotation enquiry will be recorded in your credit file, but cannot be used by a credit bureau to assess your credit score. A credit check will only be reflected in your credit score should you choose to progress from a quote to a loan.
Having a credit product such as a personal loan that you manage well by paying the monthly amount due in full and on time, can, in fact, help improve your credit score over time as it demonstrates good financial habits.
A debt consolidation personal loan may also help your score over time as it can allow you to pay off other outstanding debt.
Loans can negatively affect your score if you miss payments, or default on the amount owing. Applying for too many credit products within a short period of time can also negatively impact your score.
But I have a mortgage-free house and cash in the bank, why is my credit score low?
Simply put, it’s because you don’t have a lot of credit, and therefore credit behaviour to score. Your credit score is partly a measure of your credit utilisation ratio - that is the amount of credit you use, compared to how much you have available.
Repayment history disappears from your credit file after 24 months and credit enquiries drop-off after five years, so it is possible for even a well established credit history to disappear entirely. One way to address this could be to keep a line of credit open, that you don’t use.
I can’t afford a house! Do my rent payments impact my credit score?
Rent you pay is not considered credit so does not directly impact your credit score. However, keep in mind that lenders will likely ask you for information around your rent payments when you apply for credit so it’s a good idea to make sure they are easily identifiable in your banking history.
Does changing my address make any difference?
Yes and no. Moving house in itself should not make a difference to your score. However, where you live can make a difference. It’s not something you can control, but the suburb, town or region you live can be rated as more or less likely to be home to people who don’t manage their debt well. How your area is rated is based on statistical data about the financial behaviour of those who live there.
While it should not directly impact your credit score, it’s also worth noting that moving house too often can make some lenders judge view you less favourably, on the grounds that you could be changing address to try and dodge unpaid bills.
One thing you can do when you move house is make sure to notify all your service providers, financial or otherwise, of your new address. That way you can help ensure your financial history is easily traced, and that the credit bureaux have access to as much detail about your history as possible, to better inform your score.
I’m shopping around for the best electricity deal, does that hurt my score?
It can do. While you may just be chasing the best deal, each time you sign up with a different provider a credit check is requested. Each request is added to your credit file and can hurt your credit score. That’s not to say you shouldn’t switch for a better deal, just think about how often. You could also talk to your existing provider to see if you can get better terms, using an offer from their competitor as a bargaining chip.
Next up in Credit Score Bootcamp: