Your Credit Score Explained and Why It Matters

Your credit score is a number that the CRAs (Credit Referencing Agencies) put against your file for lenders to quickly assess how good ‘worthy’ you are to lend to or not!

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 lots of factors.

But in today’s world of ‘automation’ and minimising costs, lenders rely heavily on the financial information regarding their clients as a major way of deciding whether to lend or not.


Your credit score is a bit like an exam grade; so:

The higher you score

The greater the numbers of lenders who will give you credit at lower interest rates

The lower your score

You will be more restricted to ‘poor credit lenders’, who are more expensive

What Your Score Means

Experian provide a good explanation of their scores in the graphic below:

CE-score-explained

 

The score you will require for a new will vary depending on the specific lender; though many lenders do not just look at your score, they will also look at your file to see if it looks acceptable to them.

The Make Up Of Your Score

Your score is made of 5 categories:

Your credit 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 credit score
  4. New Accounts and Requests – if you make lots of applications without taking out new agreement, this looks bad and can reduce your credit score
  5. Length of credit history – in the UK we can only see back 6 years on your file, but the longer you file is showing good payment history over a range of agreements, the better.

For hints and tips about boosting your score, check out the following Money Saving Expert article – Credit Scores – ‘Bust myths & improve your score’:

The Money Advice Service explores in great detail in the following article – ‘How your credit score affects the cost of borrowing’:

 

Do you know what your file looks like?

To check the current level of your rating to see which options are available, we strongly recommend heading over to the Checkmyfile website to view the UK’s only multi-agency report.

Once there you will have the option to sign up for a one off FREE 30 day credit report. To view your one off 30 day FREE report, please click here. Alternatively, if your FREE period has expired, you can order a comprehensive report for a one-off payment of £19.99 by clicking here.

Checking Your Report
Checkmyfile

Testimonial Checking Your Report


Options for those with a poor credit score

The reality is, that if your score is sub 600, apart from friends and family, only really the certain lenders will offer attainable options.

We provide a range of specialist loans, from £50 to £10,000. To seem how much the available options are likely to cost, please see our calculator or visit the rest of our website.

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