What is a credit score?

Your credit score is a useful guide to help you gauge how lenders see you - and how they rate your creditworthiness. You’ll have more than one score, as each lender uses their own criteria. Plus, they report to different credit reference agencies, who use their own scoring systems.

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What factors affect your credit score? 

Each lender uses their own criteria and it can change depending on the market at the time. However, there are some key factors most consider, such as: 

  • Credit history– this shows any missed or late payments. Having a thin credit history can also impact your score 
  • Application form– the lender will check if the information provided matches up with data on the electoral roll and your credit report 
  • Income and outgoings- the more disposable cash you have, the more attractive you’ll appear to lenders, as they want to know you can afford the monthly repayments 
  • Past history - e.g. if you have any existing accounts with them 
  • Public records– including CCJs, IVAs and bankruptcy, for example. These negative markers can make getting approved for finance more difficult 

Bear in mind, one lender may give certain factors more importance than another lender does. 

The better your past financial behaviour, the higher your credit score is likely to be. In turn, there’s more chance that you’ll get approved for the financial product you’ve applied for - but there are no guarantees.  

Although having a higher score can improve your chances of being approved for credit – it is not the be-all and end-all. It’s up to the lender to decide if they’re willing to lend you money, based on your individual circumstances.  

Most lenders are more interested in your credit history than your credit score.

They can use your past financial behaviour to predict your future behaviour and see how much of a risk it’d be to lend to you.  

There are even certain lenders who specialise in providing finance for those with bad credit. (Though they often charge higher interest rates to offset some of the risk they’re taking). 

Ocean’s credit card, for instance, is designed for those with bad credit who struggle to get credit from mainstream lenders. 

Do you only have one credit score? 

Many people assume that you only have one fixed credit score, but this is not the case. Your score will vary from one credit reference agency to the next. Each use their own scoring systems. Plus, some lenders only update your payment history with one or two agencies – not all three. (Experian, Equifax and TransUnion being the main agencies in the UK). 

On top of this, each lender has its own unique lending criteria. This means your application could get accepted by one and turned down by another. It also means your score will vary between lenders.  

How to check your credit score for free 

Before you apply for credit it makes sense to check your credit report. This will show you the credit score the agency has given you, as well as your credit history. You’ll also get a good idea of how lenders see you.  

Looking at your report can help you to identify areas that need improvement. For example, there may be mistakes (such as spelling errors) on your report that could show up as red flags to lenders. If this is the case, it’d be worth asking the agency to correct them before you apply.  

You can get hold of your credit report for free from the three main credit reference agencies in the UK and through our member-only platform, CredAbility. We suggest you check your report with all three, because your report can differ from one agency to the next. 

The scoring methods used by each agency are as follows: 

  • Experian use a scale from 0 to 999
  • Equifax credit scores range from 0 to 700
  • TransUnion scores between 0 and 5, or 0 to 710

So, if you get a score of 5 from TransUnion and 999 from Experian, the difference isn’t as wide as you might think. Also, you might get an ‘excellent’ score from one agency and an ‘average’ score from another.  

Read on to find out what is classed as a good credit score in the UK. 

Does applying for credit impact your credit score? 

It’s worth doing some research to find a product you’re eligible for, before you apply. Doing so can help you to avoid making multiple credit applications at once. 

When you apply for credit, it leaves a ‘footprint’ on your credit report that lenders can see. Each application can cause your credit score to temporarily dip. If you make several applications within a short space of time, it could give the impression that you’re desperate for funds. Some lenders may be reluctant to approve your application as a result. 

To avoid this problem, you can shop around for the most suitable deals using eligibility checkers. These tools appear on most lender, broker and comparison websites. An eligibility checker shows you how likely you are to be accepted, before you apply. It doesn’t leave a footprint on your credit report or cause a drop in your credit score - so you can use it as many times as you like. 

Is there such thing as a credit blacklist? 

You may have heard rumours that there’s a “blacklist” of people who are banned from borrowing because of their financial past. This isn’t true.  

Lenders will consider the information on your application form and your credit report to decide whether they want to lend to you. It depends on how risky they think it’d be for them. At the end of the day, they want to get their money back. But, if you are rejected by one lender, it doesn’t mean that another lender won’t accept you. 

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Intelligent Lending Ltd (credit broker). Capital One is the exclusive lender.

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