Why you need to check your credit rating before you apply for credit

Why you need to check your credit rating before you apply for credit

author: Bryony Pearce

By Bryony Pearce

If you’re new to the world of credit ratings and aren’t sure of their importance when it comes to applying for finance, then keep reading, because this blog covers it all!

Before applying for any form of credit, whether it be a credit card or some type of loan, it’s always wise to check your credit rating. Credit ratings are something we can often neglect, as they’re not always at the forefront of our minds. But actually, a person’s credit score can be very influential if they’re hoping to secure credit going forward, so it’s important to clue yourself up, and that’s why we’re here to help. So, let’s get started with the basics.

What is a credit rating?

If you’re not sure what a credit rating is, then you’re in the same boat as almost 40 million people* in the UK.

A credit rating, also known as a credit score, is usually presented as a number that sits on a sliding scale. As a general rule, the higher your number, the better your credit score.

A credit score shows potential lenders how you’ve managed credit in the past, so having a high score demonstrates you’ve generally done well at paying back credit – on time and in full – when you’ve borrowed money before.

A lower score, on the other hand, shows you might have struggled to keep up with repayments, borrowed more than you could afford, or simply just never borrowed before.

How can you check your credit rating?

When it comes to checking your credit score there are several credit reference agencies that offer free credit reports – CallCredit, Experian, Noddle and Clear Score are just a few examples.

Some banks and credit card companies also offer free access to credit reports for their customers, so it’s worth checking with your provider.

What to do if you think there’s a mistake with your rating

Once you’ve accessed your credit report it’s important to check it over to make sure everything is accurate. Mistakes in your report could damage your credit rating, which could impact your ability to access credit, so be sure to keep an eye out for any errors.

If you think there is a mistake on your report, agencies such as Experian typically offer to investigate this on your behalf, and will add a note to your report in the meantime to show potential lenders that you’ve questioned the accuracy of a particular entry.

If you think something is wrong but the lender in question refuses to amend their entry, you have the right to add a notice of correction to your credit report. This is a statement that will be included alongside your report.

What lenders look for in your rating

When you apply for any form of credit, a lender will have a good look at your credit score before deciding whether to lend you money. Your credit rating shows lenders your creditworthiness by highlighting several key areas:

1. Firstly, how much money you owe. Lenders will be able to see who you owe money to, how much you owe and whether your payments are paid on time and in full, or in arrears.

2. Secondly, lenders will see your repayment habits, showing them whether you are likely to be a reliable borrower.

3. Thirdly, your credit report shows lenders if you frequently apply for credit, because each application for any financial product could leave a ‘credit footprint’ on your report.

How to improve your credit rating

Ensuring you keep up to date with any outstanding credit repayments, and paying them in full, is the best way you can work towards improving your credit score.

There are also a few simple steps you can take to improve your credit rating right away, like making sure you’re registered to vote and on the electoral roll, and ensuring you aren’t financially linked to anyone who has struggled with credit. We have loads more tips on how you can improve your credit score!

If you’re looking to secure credit but you don’t have the best credit score, be sure to do your research before filling in any applications. Multiple credit applications could show on your credit report, which might make you look desperate to potential lenders – which could negatively affect their decision.

Some lenders specialise in finding loans and offering credit cards to customers who have struggled with credit in the past – so by researching the right lender for your circumstances, you reduce the risk of harming your credit rating and increase your chances of acceptance.

The benefits of checking your credit rating

You can check your own credit report as often as you like, without harming your score. Research has shown that 7 in 10 people who checked their credit report at least once a month reported a positive impact on their credit behaviour. So, simply keeping an eye on your report could help to improve your credit score.

By checking your credit report before applying for any form of credit, you will also get a better idea of where you stand. This means you won’t get any nasty surprises if you’re turned down for credit. In addition, you’ll find out whether you need to work towards improving your credit score for a better chance of being accepted. Then you can apply for credit in confidence, without worrying about leaving unsuccessful applications on your report.

Regularly checking your credit rating will also allow you to quickly flag up any mistakes that might be showing on your report.

Since people with higher credit scores are more likely to be offered better credit deals, checking your rating will tell you whether you need to improve your score before applying for the credit you want.

*Red Dot questioned a nationally representative sample of 2,000 adults aged 18 and over on our behalf, of whom 634 were Scottish residents.


Disclaimer: All information and links are correct at the time of publishing.

author: Bryony Pearce

By Bryony Pearce

Why you need to check your credit rating before you apply for credit Why you need to check your credit rating before you apply for credit