Credit scoring is the same as credit rating.

You are credit scored every time you apply for a loan or any form of credit. You are credit scored before you can open a current or cheque account because they include overdrafts.

Lenders want to know whether you can afford the loan. And whether you have repaid your debts promptly in the past. It shows how risky you are as a borrower.

A score, or number, is given to the answers on your application form and information held on you by the credit reference agencies.

Each lender chooses how many points to give each fact. They use a mathematical formula to find your total score.

The higher your credit score, the better. Some lenders charge less to people with good scores.

You get the your required finacial product eg a personal loan , mortgage or credit card if your credit rating / credit score is above a certain figure. If it is below, you will not. You will not know what the pass mark is.

This is done by computer. You can ask for a person to check your score if you believe a refusal is unfair. Some lenders accept only customers with a good credit history. Others lend to people with a poor repayment record and charge them more.
Different lenders have different cut-off points so,

If one lender rejects you, another might accept you.

You score highly if:

• you have several credit cards and loans that you repay promptly : you do not use lots of cards up to your credit limit

• you owe a modest amount of money compared to your income and outgoings

• you have borrowed money over many years

• you have lived at your current address for some years

• you have worked for the same employer for some years.

Your credit rating is pulled down if:

• you have been bankrupt

• you have county court judgements (CCJs)

• you recently applied for a lot of credit

• You have not had previous credit – even if you have always lived within your income. This can hit groups of people such as the elderly or ethnic minorities who tend not to use credit cards.

• you opened several new accounts within a few months

• you constantly use credit cards to their limit or beyond

• you are not on the electoral roll – this is the first proof of your existence. This can create problems for people who move address and for long term residents from overseas who have not adopted UK citizenship even though they pay taxes.

Any lender who refuses to give you credit must tell you if it used credit scoring. But it does not have to specify why you failed.

 

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