Others damage their credit score by missing regular monthly debt repayments, taking out too much credit or failing to register on the electoral roll. Your credit report is a history of all the credit you have taken out in the last six years, including overdrafts, mortgages, credit cards, mobile phone contracts and HP payments. The data is held by credit reference agencies and lenders check this before deciding whether to grant you a mortgage, loan or credit card, and how much to charge.
Lenders want to see applicants spending wisely and may get nervous if repeated gambling transactions show up on your records, Michael Barlow, head of search engine optimisation at car finance provider Zuto, said. “Underwriters will look for signs of financial distress relating to gambling activity, to be confident you will repay your loan.”
Other risk indicators include an unarranged overdraft, missed direct debits, debt collections, payday loans and hefty overall borrowing levels.
“If you have more than one of these factors, it may affect your chances of being approved,” Barlow said.
Shoppers applying for Buy Now Pay Later (BNPL) credit such as Klarna, or store cards and instalment plans, are taking risks by inflating their income to secure a higher credit limit.
First-time buyers are particularly vulnerable, with one in three admitting they lie about income, according to research from brokers First Mortgage.
Compliance director David McGrail said as well as breaking the law, it could jeopardise your chance of getting a mortgage: “You could end up with a higher credit limit, making it easier to fall into bad debt so you are refused credit later.”
Eight out of 10 do not realise using BNPL products can affect your credit score, especially if you fail to pay on time. “If a lender sees you have frequently missed payments it will affect its judgment on whether you should be approved for a mortgage, especially the high loan-to-value deals firsttime buyers often rely on,” said McGrail.
To boost your credit score, make sure you are registered to vote on the electoral roll.
Pay all bills on time to show lenders you can manage your finances.
Avoid high levels of debt, as this will suggest you have money problems and make lenders wary. Check your report with the three main credit reference agencies, Equifax, Experian and TransUnion, and correct any mistakes.
Borrow well below your credit limit on existing cards. If you have access to credit but are not using it, this suggests you are managing your money well.
Be wary around social media. Underwriters may even check posts on Facebook and other sites for evidence of overspending or reckless living.