Credit scores do not exist!
The truth is that there is no single universal number in the UK that goes out to lenders informing them how good you are considered from a credit score point of view.
What you do need to focus on is your credit reference file.
This is data that is used whenever you make an application for credit, whether you are on the electoral roll, who you are financially linked to, whether you have any county court judgements against your name, whether you are paying on time, what products you are buying on finance, etc and this data needs to be checked by you once a year!
There are a number of companies out there who will help you to check your credit file. Companies such as Experian, Equifax and Transunion UK usually let you access your credit file and report for free. It is advised that you should check your credit files at least once per year. If you are ever rejected for credit, check your report before you go and apply again.
At the end of the day, it is a money making activity created by these credit score companies.
They are useful from the point of view of giving the consumer a loose indication on how a lender would view you as their customer. This is only one element that is taken into account based on a consumer’s credit history; the biggest element is whether you can afford the repayments.
We would advise that you do not worry about credit scores too much. Each lender gives importance to different elements and will search you on their own programmes/against their own measurements. Things like credit file, application form information, past dealings that it has had with you are all taken into account. One of the biggest and most important things is how they view you as a potential asset – are you potentially profitable or are you a risk?
Lenders want to make money from you. They absolutely do not want to lose their money therefore if you are deemed a risk you will be rejected for credit.
However, given that all lenders use different elements to make their decision on whether you are a risk or not, if you are rejected for credit from one lender, you may not be rejected from another so do not despair.
Ensure that you check your credit file before making another application with another lender. Check for any errors that may have made their way into the information. Also check that you are on the electoral roll and that you have not missed any payments that you have with other lenders.
There are lots of ways to help boost your credit file and deem you more attractive to a lender.
Ensure that you pay existing credit on time. Ensure that you actually have credit in the first place – lenders need to see that you are responsible with existing credit so you need to build a foundation first.
It’s not totally pointless to be faced with a credit score that a credit score agency has given you. It provides a great indication of how likely it is that you will be successful at obtaining credit.
The issue is that the general public have no idea how each agency works that figure out so we have to just view it as an indication only.
Whilst we are not completely sure on how they reach their decision, there are some things that are commonplace:
Yes. Plenty. The only information on your credit file is linked to financial data.
The takeaway is that although credit scores do not technically exist, they can be a good indication of where you stand from a credit risk/prospective credit perspective. Click here to read our guide on how to check your credit reference file for more information.