There is a common misconception that we all have our own unique credit score.
And many people also believe it’s this ‘universal’ credit score that lenders look at when we apply for credit.
But in actual fact, this is a complete myth - lenders can’t see your credit score, because there’s no such thing as a unique credit score. Instead, they’ll look at your credit history.
Your credit history shows how responsible you’ve been when borrowing in the past. And this is what can ultimately affect any application for a credit card, loan, mortgage or any other credit you make.
So if my credit score doesn’t matter, why do I have one?
It’s simple - each credit-checking agency has its own unique criteria by which to assess your credit history. This results in a credit score that indicates how good or bad a particular credit checking agency thinks your credit history is.
So, for example, your credit score with Noddle, will differ from the score you’re given by ClearScore.
Each lender has their own criteria too. So if one rejects your application, it doesn’t necessarily mean you’ll be rejected by all lenders.
The one thing that every lender will do is look at your credit history. They will view your borrowing activity over the last six years or so. This helps them decide whether you’re a reliable borrower.
What about my credit history?
" It’s your credit history that can affect the outcome of your application for credit."
Lenders will use one of three credit-checking agencies – Experian, CallCredit or Equifax – to see how responsible you’ve been with previous payments. So any negative marks, like late or missed payments, will be visible for lenders to see.
If lenders view you as a ‘risky’ borrower, perhaps because you’ve previously struggled with payments, they might be less likely to lend to you.
This is why it’s important to make sure you keep tabs on your credit history. Checking it regularly gives you the reassurance that everything is up to date and correct. After all, it’s your credit history that can affect the outcome of your application for credit.
Is my credit score useful?
Your credit score indicates how positive or negative the credit-checking agency thinks your credit history is. So it is worth keeping an eye on your scores, even though lenders don’t see them.
If your score gradually becomes higher, you know your credit history is improving.
Will I be accepted?
If you do have a history of bad credit, it doesn’t necessarily mean it will stay like this. There are ways you can improve your credit history.
One way to build up your credit history is to take out a credit card. With this in mind, you might want to consider applying to lenders who are more likely to accept you with bad credit.
As long as you keep up with your payments each month, your credit history will start to improve.
You may find that if you’ve never borrowed before, it makes it harder for lenders to judge how responsible you are as a borrower. In this case, credit builder cards can be beneficial in building up your credit history.
Can I check beforehand?
Before you apply, it’s worth checking what products you’re likely to be accepted for. Free credit checking agencies such as Noddle, ClearScore and CreditMatcher all offer this service.
They will search and compare products to see which you’re eligible for based on your credit history. This is a soft search that will not leave a mark on your credit history. It means you can search for products without it being visible for other lenders to see.
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