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How does credit rating affect your ability to get a loan?

Moneymagpie Team 2nd Nov 2022 No Comments

Reading Time: 2 minutes

Understanding credit ratings can feel like a minefield at times. However, it helps to have a full understanding of what they mean and how they can be impacted when applying for personal loans, arranged overdrafts, mortgages and more. While there are many factors that may impact your credit score and your chances of successfully applying for credit, an area of concern for many people relates to their partner’s credit score and how it impacts their own.

To help clear this up, we’ve put together a guide on what can affect your ability to get credit and what you can do to protect yourself.

What can adversely affect your ability to get credit?
How does your partner’s credit score affect yours?
How can you protect your credit score?

What can adversely affect your ability to get credit?

With so many things that can impact your chances of getting a loan, it helps to be fully informed. Here are some of the most common contributing factors:

Payment history – Making your repayments when they’re due is the first step to helping your credit history.
Amounts owed – Any outstanding debts you have can influence your final score.
Credit history length – Those that have frequently borrowed money in the past may find it harder to get credit.
Recent credit – If you’ve opened a large number of new credit agreements recently, getting more may be tough.

How does your partner’s credit score affect yours?

You’ll be pleased to know that your partner’s credit score won’t directly affect yours, unless in situations where you and your partner share a joint account and are both named, deeming you both responsible for any related debt. Additionally, if you apply for a loan or mortgage with them, it will be recorded on your credit file as this shows that you’re financially linked to this person. Lenders will be able to see this and if your partner does have a poor credit score, this can harm how lenders may view you.

This is why you and your partner should check your credit scores before applying for credit so that you can decide whether it’s a good idea or not.

How can you protect your credit score?

If you want to keep your credit score healthy, these are some ways to help maintain your ranking.

Pay back debts on time
Only apply for credit when you need it
Avoid signing up for credit with others people if you can
Monitor your accounts frequently
Keep your accounts secure

It’s not always easy to keep your credit score high and there are still options available for those with a poor credit history. For example, a bad credit loan could be an option to look into to secure the funds you need. You just need to make sure you can afford the monthly repayments – and likely high interest charges – to avoid damaging your credit report further.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.