“your credit score will also be used by a lender to help them determine the rate of interest they’ll offer you...”
Credit score and credit history: what's the difference?
A credit score is what lenders use to help them determine whether or not to lend to you. To do this, they will use your credit history (read on to find out what this is), your credit application (the details you leave when you apply for credit) and any past information they have on you (for example, if you’re an existing customer). All of this will be used to generate a credit score for you, which as every lender has their own rating system, will vary. The better your score, the less of a risk they may see you as and the more likely they could be to lend to you.
If you’re successful with your application for credit, your credit score will also be used by a lender to help them determine the rate of interest they’ll offer you. It’s quite common for lenders to offer credit to people with lower credit scores, but to charge them a higher APR, reflecting the higher risk they assess them as.
Credit reference agencies also come up with their own credit score or credit rating based on how you’ve managed credit in the past but lenders will never see this, so you don’t need to worry too much about it.
Your credit history consists of a record of how you’ve managed credit over the previous six years. You have a legal right to see what the credit reference agencies hold about you. For just £2 you can apply for your “statutory credit report” from one of the three credit reference agencies Equifax, Experian or Callcredit.
It’s a good idea to regularly check your history from time to time to see what information it shows about you. It will show the repayments you’ve made on all forms of credit, including things like pay monthly insurance, whether you paid the correct amount and whether you paid on time. For example, you may be surprised to see that missed payments from a couple of years ago are still on there, or similarly, a CCJ you were issued with. Credit problems like these stay on your report for up to six years, so they can still impact your credit history quite a while after they’ve happened.
If you find something on your credit report that shouldn’t be there, like a missed payment that you can remember paying and have evidence of doing so, you can raise this with the company responsible and ask them to update their records based on your evidence.
Want to know more? Read part 2 of our guide here.