Whether you’re applying for a loan, mortgage, credit card or any other item of credit for that matter, the chances are you’ll be the subject of a credit check.

The purpose of the credit check is primarily to establish an applicant’s credit-worthiness based on their credit file. Essentially, a lender will use the credit check to evaluate the risk of lending money to each applicant.

Often, when discussing credit checking, you’ll hear to term ‘credit score’ being used. Throughout this piece, we’re going to discussing the finer details of your credit score.

What is a credit score?

A credit score is simply a numerical value that is calculated based on your credit history.

There is no such thing as a universal credit score. Each credit reference agency will have a different credit scoring scale.

For example, Experian’s scoring system runs from 0-999, with scores of 0 – 560 being very poor and scores of over 961 being excellent.

Equifax on the other hand have a maximum score of 700 with anything under 279 being very poor and anything over 465 being excellent.

Some credit reference agencies will even use a simple 1-5 scale with 1 being poor and 5 being excellent.

What is my credit score based on?

In simple terms, your credit score is based on your past repayment behaviour.

Someone with a high credit score will have managed their past credit commitments immaculately. Whilst someone with a low score will have probably suffered issues with credit commitment.

Beyond repayment history, there are several other factors that could cause your credit score to change. This includes:

  • Your credit utilisation rate: This is the amount of available credit you have versus your total debt. If you have 3 credit cards, all of which are maxed out, you credit utilisation is very high. Having high credit utilisation rates can lower your credit score as it may indicate poor credit management.
  • Recent credit searches: Usually, when you apply for an item of credit, the creditor will carry out a credit search. This credit search will leave a footprint on your file, stating that your file has been searched on that specific date. If you have multiple credit searches on your file within a short space of time, this can lower your credit score. Why? It indicates that you may be experiencing financial instability and are searching for credit in order to fix it.
  • Electoral roll: Your electoral status can affect your credit score. Being registered to vote at your current address makes you more traceable as a debtor. Equally, not being registered on the electoral roll makes you tough to trace.

I’ve never had any credit; how does this affect my credit score?

Unfortunately, as someone who’s never had any credit, you’ll be treated similarly to someone with a low credit score.

This is because you have not shown that you can successfully manage credit commitments.

To improve your score, you need to obtain credit. A good start is a credit builder credit card. These have high rates of interest, but providing you clear the balance in full every month you will not incur any interest charges.

Simply putting £100 on a credit card each month, and then clearing it in full can do wonders for your credit score.

How do I check my credit score?

There are several ways you can check your credit score, some are free and some cost money.

Larger credit reference agencies will allow you to purchase your credit report online for around £10.

Services like Noddle allow you to do so for free. These may not have the same level of detail as the larger credit reference agencies, but they are a great place to start.

We recommend checking your credit report regularly to ensure the information held about you is correct.

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