Your Credit Score Explained

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Your credit score is a number that the credit referencing agencies put against your credit file for lenders to quickly assess how ‘creditworthy’ you are to lend to or not!

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In the ‘good old days’, to get a loan you would meet the bank manager and they would make their decision to lend based on many factors, your credit score is only one.

Though in today’s world of ‘automation’ and minimising costs, lenders rely heavily on credit scores as a major way of deciding whether to lend or not. Your credit score is like an exam grade; so:

• The higher you score – the greater the number of lenders who are likely to grant you a lower interest rate loan.
• The lower your score – you will be more restricted to ‘bad credit lenders’ who are more expensive.

 

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What Your Credit Score Means

Experian provides a good explanation in the graphic below:

The score you need for a loan will vary depending on the specific lender.

Many lenders do not just look at this, they will also look at your credit history to see if it looks acceptable to them.

 

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The Make-Up Of Your Credit Score

Your score is made of 5 categories:

1. Record of paying your bills on time (payment history) – the more history you can show making payments as you should, the better your score will be

2. Total indebtedness – how much you owe in total does affect your score, especially if they are balances being run on credit cards.

3. Credit mix – if you have a good mix of credit all with a good payment history this looks good and helps your score

4. New Accounts and Credit Requests – if you make lots of applications without taking out a new agreement, this looks bad and can reduce your score

5. Length of credit history – in the UK we can only see back 6 years on your credit file, but the longer your credit file is showing good payment history over a range of credit agreements, the better.

 

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For hints and tips about boosting your score see our credit score improvement guide

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Do you know what your credit file looks like?

To check out your credit rating, a couple of options

• Checkmyfile –  multi-agency credit report, which will show you all the entries from all the three credit reference agencies (FREE for 30 days, then just £14.99 a month – cancel anytime)
• Credibble – can show you your credit file, plus what you need to do to improve your credit score 👍 (Only £7.75 a month – cancel anytime)

 

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Loan options

Unfortunately, if you have sub 600 poor credit score, apart from friends and family, it is only the ‘poor credit’ lenders that are available for a loan.

As you have probably guessed, we are a loan broker and specialise in online guarantor loans.

We have included a lot of information on our site to help you to decide whether or not this is the right type loan for you, as well as a compare loans page to quickly browse the various options: