Boris Dzhingarov writes: Your ability to obtain credit is crucial to securing many of the biggest purchases in life, and this ability is largely dependent on your credit score. In many cases, the higher your score, the cheaper your credit will be. The key to maintaining a healthy score involves knowing exactly what factors contribute - and here are five of the most common.

1. Your repayment history
How much you borrow, how much you repay and whether or not your repayments are made on time will all be recorded on file against your name. This information will be used by credit providers to ascertain the risk of lending to you. This is the most important factor in determining your credit score, and it is something your actions can directly affect. By making payments on time and sticking to credit arrangements, future lenders will have tangible evidence of your ability to repay your personal loans, credit cards and mortgages.

2. Existing debts and bankruptcies
If you have any outstanding debt on your credit file, it's important to pay it off as soon as possible - and before you apply for further credit. This information is held against your name for a period of six years, and if your level of existing debt is too high it can seriously hamper your chances of obtaining further credit. Remember, simply forgetting is not a defence.

3. Financial partners
Whilst simply sharing an address with someone shouldn't affect your credit score, being financially linked with someone who has failed to keep up loan repayments can affect your own status. For instance, if you have an outstanding joint loan with a former partner, who has since defaulted on credit agreements elsewhere, your own rating could be significantly affected. It's important to check your credit file regularly to ensure that previous financial links are no longer showing as active.

4. Being on the electoral roll
There is no better way to prove your legal residence than by being registered to vote. Checking this is relatively easy for lenders, and it can often be the difference between being accepted for a loan and being rejected out of hand. Being on the electoral roll proves to lenders that you have a permanent, stable address - reducing the chances of them having trouble tracing you in the event of missed payments.

5. Your history of moving house
Lenders place great emphasis on stability, so having a long history of changing addresses will not do your chances of obtaining low cost loans any good at all. Although where you live may not always be within your control, it's worth trying to limit how many times you move home if you plan to buy a car or apply for a mortgage in the near future. However, as long as you always register to vote at your addresses, the damage to your credit score shouldn't prove critical.

The only way to keep track of your ability to obtain credit is to regularly check your credit score with one of the UK's major credit reference agencies. By altering mistakes and having erroneous information removed from your file, you can maximise your chances of getting the finance you need at the right price.

By Boris Dzhingarov

© 2014 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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