Whenever you make an application for credit (e.g. a mortgage, credit card or personal loan), the lender will turn to these agencies to look at your score and history, which will play a major role in the success or failure of your application.
By looking at your credit report in conjunction with its own assessment of your circumstances, the lender will decide the following:
- Whether to lend to you
- How much to lend to you
- How much interest to charge you
What’s the difference between a credit score, a credit rating and a credit report?
Your credit report or history is a detailed record of your borrowing history, with information such as the loans you have held and applied for. It also includes personal information such as your name and address.
Your credit score is a number that is calculated using the information on your credit report. Your score determines your credit rating which could be “very poor”, “poor”, “fair”, “good” or “excellent”.
When deciding whether to take you on as a customer, lenders will usually look at your more recent financial history to determine their decision. However, your financial decisions, both good and bad, will remain on record for up to six years.
What does a credit score look like?There is no single, definitive credit score for an individual. Each Credit Reference Agency (CRA) uses a different scale. Lenders will normally check with one or more of these agencies when assessing your application for credit. These are the scoring ranges employed by the main UK CRAs (the higher the number, the better the score).
Depending on your score, you’re said to have excellent, good, fair, poor or very poor credit:
|TransUnion (formerly Callcredit)||0-550|
|1: Very poor|
Having a decent credit score will make it easier to get approved for credit cards and is also likely to affect the credit limit and interest rate that you’re offered by lenders.
What is and isn’t included in your credit file:
There are many details listed on your credit history, which help lenders determine how high or low risk you are. However, you’ll be happy to know not every detail of your life is there for show.
Find out what lenders can and can’t see when studying your credit file.
- Name, address and date of birth.
- Past credit applications.
- Credit repayment history, including late or missed payments.
- Your existing debt.
- Your electoral register presence.
- Any joint credit cards or loans.
- If you’ve been declared bankrupt or have an IVA.
- Any county court judgements (CCJs).
- Current account turnover.
- Student loans.
- Medical history.
- Council tax arrears.
- Criminal record.
- Parking or driving fines.
My credit score is low. How can I improve it?
It will take time to improve your credit history and won’t change overnight. Start by looking at your credit report to see if there are any errors. If there are, you can contact the credit reference agency to set the record straight.
Make regular, on-time payments to your existing debt (e.g. loans and credit cards) and try not to make numerous applications for credit (successful or not) within a short space of time.
If you’re not on the electoral roll, visit your local authority’s website to get added.
If you have no credit history at all, or want to rebuild a poor one, consider getting a credit builder card.
Read about how different factors can affect your score
Read more on this topic
Portify review 2020 Portify is a dedicated money app for freelancers and gig economy workers. We've tried it out.
National Debt Relief review If you're finding it hard to pay off your debts, National Debt Relief may be able to help. Find out how it works here.
CreditLadder review March 2020 Paying the rent is no fun, but thanks to CreditLadder and Experian you can now make it count towards your credit history, for free.
Do utility bills affect your credit score? Discover how your credit score will be affected.
How to remove black marks and defaults on your credit report Repairing your credit report won't be a quick and straightforward process, but it doesn't mean it's completely impossible. This guide gives you a few tips on how to approach the problem.
Debt Free Direct review If you're considering an IVA, it's important to understand how the process works and how it will impact your life. This review looks at how Debt Free Direct handles it.
FriendlyScore review March 2020 Getting a loan through social media if you don't have a credit history may seem odd, but that's the service FriendlyScore wants to provide.
Can social media impact your credit score? Some lenders do use social media to assess your loan application, but it's still a fairly uncommon practice.
Bad credit Bad credit can make your financial life complicated, so this guide helps you figure out what it means, why you may have it and what you can do about it.
TransUnion credit score, rating and report What is a TransUnion score, rating and report? Find out what factors affect your TransUnion score and how can you improve it.