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Complete Guide of How Credit Scores Work in the UK | Pave UK - YouTube
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your credit score can affect what kind
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of financial products you can access in
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the uk
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if you want to apply for a new loan
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mortgage or credit card you should know
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how a credit score works
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so who decides your credit score also
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known as your credit rating and how is
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it determined
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a credit score is used to show your
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credit worthiness the best credit
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facilities are usually reserved for
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those with the best credit scores
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in this guide we'll break down how
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credit scores work in the uk credit
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score is an analysis of a person's
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credit worthiness it is represented by a
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number which is rated on a scale
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these scales could differ for example 1
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to 1 000 or 1 to 710
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credit scores are put together by credit
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reference agencies the agencies do this
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for several reasons including to
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understand a person's history with
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credit
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determine whether the person qualifies
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for a credit product
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establish what kind of product the
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person is eligible for
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each credit reference agency calculates
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credit scores in its own way
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each credit lender will also have
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individual criteria to assess
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applications however your credit score
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is a standard indicator that lenders
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look at during the approval process
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these scores determine how much risk is
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associated with you as a borrower and
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what your borrowing habits might look
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like
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it's important to understand that you
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don't have a single credit score that
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all companies access and use
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instead different credit rating agencies
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look at your data to determine their own
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measure of your credit worthiness
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each organization follows the same
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general lines to determine this but
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different credit rating agencies may
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take a slightly different perspective
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that being said there are a couple of
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essential pieces of information that are
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almost always used to determine your
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rating
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a credit score is made up of data held
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by credit reference agencies
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this information covers four main areas
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one income information
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the first thing credit reference
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agencies look at is the personal
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information you used when applying for
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credit
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this includes information about your
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income and employment
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these factors can influence your credit
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worthiness
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individuals with lower income levels or
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an unstable employment status could be
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seen as a greater risk to lenders when
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applying for credit with any lender
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always make sure you enter these details
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accurately as this information is used
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to determine your credit suitability
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two payment history
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your payment history has a significant
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impact on your credit score in the uk
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this history shows lenders how you've
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been able to handle credit in the past
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this helps them determine how likely you
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are to be able to make payments in the
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future
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the most important thing to remember is
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to ensure that all your bill payments
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are made on time and in full
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this shows stability and that you can
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borrow and repay money
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if you've successfully repaid lenders in
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the past this is a good sign for your
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credit score if you have a history of
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late or missed payments then this will
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surely damage your credit score your
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payment history with nearly all lenders
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is held by credit reference agencies and
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can be seen by other lenders this means
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that even if you are applying for credit
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at a new bank then they can still check
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your history with other creditors
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three credit utilization
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credit agencies check your credit limit
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on any credit agreements that you
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currently have and look at how much of
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them you have utilized
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if you've maxed out your credit limit
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this tells credit agencies that you are
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reliant on debt which is not a good sign
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keeping your credit utilization low
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shows credit authorities that you are
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able to borrow responsibly and stay in
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control of your debt 4. credit mix
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your credit mix refers to the different
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types of accounts that your credit
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report is made up of this could include
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any type of money borrowed such as
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credit cards student loans mortgages car
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loans and more
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your entire credit mix is considered
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when determining your credit score
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having a variety of different credit
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accounts shows lenders that you are able
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to manage multiple credit obligations
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it's important to maintain a stable
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payment record across your credit mix
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a healthy mix of credit can keep your
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credit score looking good as long as
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you're able to keep up with all of your
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payments
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credit reference agencies
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in the uk there are three major credit
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reference agencies these agencies keep
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all the information on your past credit
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behavior
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if you ever make a credit application at
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least one of these agencies will be
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involved in sharing data about you
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these three agencies are equifax
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experian and transunion the data kept on
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your file generally only goes back six
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years unless there was a significant
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event like bankruptcy your credit
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history before this point will often not
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be considered
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understanding the fundamentals of how
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credit school works in the uk will help
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you develop better financial habits when
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applying for a loan
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pay attention to the different factors
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that influence your credit score and
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maintain them responsibly to help you
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get a good credit rating for potential
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applications
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