Your credit score and you
Understanding your credit rating is vital when considering borrowing money in any form. Whether you are looking for a new credit card, a personal loan, or secured loan, or a mortgage, your credit rating is the major influencing factor as to whether or not your application for credit will be successful.
What is a credit rating?
Your credit rating is the information held on you that is used by credit agencies to assess your credit score. It is the information assessed to gain an estimated likelihood that you will repay any given loan; the better your credit rating, the lower the risk you present to potential lenders.
What is a credit score?
While your credit rating is the information held regarding your financial situation, your credit score is an independent assessment of the risk associated with you as a credit applicant. This score does not exist independently of its own accord; each financial institution will create its own credit score for your application based on the information presented in your credit record.
What affects my credit score?
A number of personal factors and matters of public record make up your credit score. These include:
Why is my credit score important?
Your credit score is one of the most valuable things about you, and something well worth protecting. It is important to know how potential lenders will view you when applying for credit, as your credit score will affect the interest rates offered to you on loans, and how much you qualify to borrow.
Can I see my credit report?
Yes, for a fee. There are two major credit reference agencies in the UK who can provide you with a detailed copy of your credit report: Equifax and Experian. For a fee of around £2 they can provide you with a copy of your statutory credit report for your information.
My credit rating is very low. What can I do to improve it?
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Check your credit report for mistakes and apply to the relevant parties to have incorrect information removed, such as unauthorised applications for credit or multiple checks from one application. If you have separated from a partner who you were financially tied to who had a poor credit rating, apply to have a notice of disassociation put on your credit report. If there was a specific reason for your credit rating falling so low, such as involuntary unemployment that resulted in missed payments and court proceedings, you can apply to have a note of explanation put onto your report that some lenders may take into account when considering a credit application.
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The most important thing to do is to make your payments on time and in full over a substantial period of time. Keep up to date with credit card and loan repayments and don’t let your bills fall behind. With time and effort your credit score will gradually improve, the dedication is worth it if you want to be able to borrow money in the future.
I am struggling with my debt. Where can I go for help?
If you have come to the point where you feel your debts are unmanageable, there are some organisations that offer free and advice and assistance.
National Foundation for Credit Counselling
http://www.nfcc.org/
Consumer Credit Counselling Service
http://www.cccs.co.uk/
Please note: this website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research. For more please refer to our terms and conditions of use.