01183 218197
(+44 118 321 8197 from abroad)
Monday to Friday10am - 4:00pm
Saturday, Sunday & Bank HolsClosed

A guide to credit rating and credit scoring

Our guide to Credit Scoring, and how Credit Searches play an important part in the calculations

Credit Searches

In the current economic climate, it's good to know all about credit searches, ratings and scores. With a tightening of credit, available lenders have, almost without exception, used credit scores to direct more of their lending to those of us termed 'more credit worthy' - meaning the need to maintain as good a rating as possible has never been more important.

Now it's possible to monitor your own credit rating and to be able to see how it changes alongside your financial circumstances. You can also check your credit report before applying for a loan, mortgage or credit facilities to see how this might affect a lender's decision.

So what is a credit report or a credit score?

Credit Report:

A report will vary depending on the supplier but the majority would include:

  • Your personal details
  • Summary of your credit history e.g. repayment history, number of credit accounts, amount of available credit to you on credit cards, overdrafts etc., the total amount of your outstanding debt and number of accounts that are overdue (if any)
  • Credit account information showing credit agreements with lenders.
  • Details of previous searches and the number of times your credit report has been searched
  • Any CIFAS information (CIFAS is a data sharing organisation for credit reference agencies, and more information can be found at their website www.cifas.org.uk)
  • Other important information that could affect your credit rating e.g. public information, County Court judgements or bankruptcies

Credit Score:

A credit score is completed by lenders combining the results of your credit report, your application form, and perhaps your credit history with the company you are applying to. Each item is allocated a value which then creates your credit score. The credit score will then assist the lender in making a decision as to whether to lend. If agreed, the scoring may also help establish the terms of the loan, such as the interest rate or fee. Normally, the higher the credit scoring, the more likely you will be to borrow money and at more favourable terms.

How can I obtain my Credit Scoring or Credit Report?

A new entrant into the market is creditkarma who are currently offering a credit report and tracking free for life.The way they do this is to keep in regular contact with you, marketing you financial products your credit score suggests you might be eligible for, ranging from credit cards to energy deals.

They also offer you the opportunity to access paid for upgrade services which offer more in depth analysis of your financial standing.

One of the biggest credit search companies used by lenders is Experian. Applying for a free credit search with them will give you details of the information they hold about you such as:

  • A free 30 day trial
  • Advice as to how to improve your credit rating
  • Access to expert knowledge and tools.
  • Alerts to changes on your reports.
  • Understanding identity theft and how to avoid becoming a victim.
  • The opportunity to access a free Experian credit score.

These services are particularly attractive if you are thinking about a major credit purchase (such as a mortgage), as the cost of a poor credit rating can be very high in terms of a reduced range of more expensive loans being available to you.

This content was last reviewed on 26/09/2022