Age

The risk of you defaulting on a credit agreement generally decreases with age - but it's not a straight line relationship. What this means is that when you are relatively young, your credit score is adversely affected by your age.

As you reach middle age, your credit score is starting to have an increasingly better influence from your age. Your middle years are when you are typically at your most Credit Active and statistics prove that in your early middle age you are best equipped to pay your commitments as they fall due. As you get older, the financial commitments that come from a growing family often present a heavy drain on your disposable income and your Credit Score will temporarily lower. In late middle age, once the nest has flown and income is peaking - typically when you are between 45 and 55 years of age - the impact of age on your credit score becomes strong again.

Only when you are nearing pensionable age does the positive effect start to lessen, as your income is typically reduced. Even though this may not accurately reflect your own circumstances, it is true for the significant majority. As with all elements of properly derived credit scorecard, the impact of your age on your credit score is proven statistically from a very large sample of consumers.

Late Accounts

We see late payments on the majority of Credit Reports. Bearing in mind that the payment history is recorded for each account for up to 72 months, the occasional missed payment is simply a matter of human nature and does not carry a heavy penalty on your Credit Score.

Late payments only really start to affect your Credit Score adversely when there are many present on an account, or on many accounts. Although these may be due to several reasons, a lender will assume that they are due to an inability to meet payments as they fall due, and will assume that the past is a guide to your future performance. In general terms, the impact of late payments on your Credit Score increases progressively with the number and severity of the late payment statuses seen on your Credit Report.

Accounts in Arrears

Arrears indicate non-payment of instalments on an account, beyond just 'late payments'. Arrears are often managed by the collection departments of lenders in an attempt to restore an account back to an up-to-date status, to prevent the matter deteriorating to formal and costly recovery action. As part of the collection process, lenders typically may give further time to pay, or may agree a temporary payment holiday if your personal circumstances warrant such action.

The presence of Arrears will have quite a negative effect on your Credit Score, and the impact will depend on the frequency recorded on your Credit Report. Arrears are also likely to guarantee that you won't be offered Typical APR on applications for credit.

Statistically, approximately half of accounts in Arrears end up in Default, so the presence of Arrears on a Credit Report is strongly predictive of bad debt.

Court Judgments

Court Judgments have a very negative impact on Credit Scores as they are very predictive of future bad debt loss. Their impact depends on the number of judgments recorded, the amounts of the judgments, and their recency.

The presence of a Court Judgment indicates that a lender has had to resort to the Court to try to obtain payment. The Court Judgment itself means that the law recognises that the debt is lawfully due It also enables the creditor to take various post judgment remedies, such as calling in the bailiffs or seeking an attachment of earnings order.

Insolvency

An individual who is insolvent has been confirmed in a court of law to be unable to meet their credit obligations as they fall due.

Insolvency has a severe adverse impact on Credit Scores and remains reported on Credit Reports for six years, whether discharged or not.

An active insolvency carries with it an automatic maximum limit on any borrowing of £500, but this is unlikely to be provided by a lender at a palatable cost.

When an Insolvency is marked as having been discharged, the severe adverse impact of the Insolvency is reduced, but only very slightly, reflecting that people with Discharged Insolvencies on file are still highly likely to default on any future borrowing arrangement.

Homeowner

Being a homeowner is an indicator for a strong level of financial stability.

Contactability

A lender often looks for the availability of a home phone and mobile numbers as an indicator on how contactable you are.

Not having a home phone can also provide an insight into your status, as most financially stable individuals have a home phone number - this is even more the case as our reliance on internet access has increased.

Postcode Rating

By using public databases such as the Register of Court Judgments and insolvency records, and combining it with census data and 'lifestyle' information collected from questionnaires, the financial risk of a postcode can be measured.

This affects your own credit score if either your credit file is 'thin' or if the lender you are using is small, new-to-market or not able to see full credit files.

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