Advice and Tips

3 credit red flags you didn’t know about

Jamie C, 
Monday, 25 April 2016

It is important to check your credit report at least once a year, but do you know what you’re actually looking for?

When applying for credit of any kind, your details will be run though a credit check. A credit report will be created for your credit provider to go over and decide if you are suitable for the credit or finance you have applied for.

Your credit report will show smaller details such as any late payments from credit cards, phone bills, mortgages etc and will also show major red flags such as bankruptcy filing. Most people are aware of the common red flags that can appear on your credit report, such as the items discussed above. However, we have three red flags you probably didn’t know about.

#1 Having excessive credit card accounts

There is no ‘ideal’ number of credit card accounts one person should have but generally, it is not a good idea to have numerous accounts and credit lines open at one specified time.

Having too many credit cards, even if you do not use all of them could make you appear to be a high-risk candidate for more credit. Having these credit cards could make you appear as someone who is either already spending beyond their means, or someone who has the option to do so.

#2 Recent enquiries

When you are looking for credit it is likely that you will shop around a little before finding the best deal. Once you start shopping around for credit different banks will be pulling up your credit report and these activities will show up on your report.

Be careful with timing because if you apply for a store or credit card in the same time frame a lender may question why you’re trying to obtain so much credit. We recommend that you avoid applying for multiple credit cards within the space of a few weeks or months, especially if you are planning to apply for high finance such as a mortgage or car finance.

#3 Having a consumer statement

A consumer statement is a small statement that some people are advised to add to their credit report. Individuals use the statement to contest late payments, disputed credit accounts or to generally explain to potential creditors why something negative is in their credit report, such as a divorce or temporary unemployment.

Although the Fair Credit Reporting Act gives you the right to add a consumer statement to your report, you might think it will help a creditor understand why you missed certain payments. However, adding one is typically a turnoff to leaders.

Even if you have a legitimate reason for missing important payments some lenders may think that you don’t practice good money management or that you are not a good saver. In most cases it’s best to avoid adding a consumer statement to your credit report altogether.

If you are planning on applying for finance of some form it is important to pay attention to these three red flags and try to avoid them in the coming months to your application.

Jamie C,