What is a credit score and how does it affect me?

Christin Hume

Photo by Christin Hume on Unsplash

From the age of 18, credit reference agencies like Experian, Equifax and Callcredit start to hold information about the types of credit-related accounts that you own. Your credit score along with your credit report will allow financial institutions to check your creditworthiness when you apply for certain types of products.

What is a credit score?

Each credit reference agency has their own 'score' that they will give you. One agency may give you a score out of 1000, and another may give you a rating out of 700. Each agency has their own way of calculating your score, and they all use different methods. Your credit score is an indication of how likely you are to pay back money if it is borrowed from a lender and can give you an indication of how likely you are to be accepted for credit.

What is a Credit Report?

A credit report is a report that contains your financial history throughout the previous six years. It will show you all of the accounts that have access to credit, credit cards, loans, hire purchase and will detail the payments that have been made to the account. It will also show if you have had any defaulted accounts registered to your report. You should check your credit report regularly and take action if there is something on there that shouldn't be.

Great score but still rejected for credit?

Lenders look at your credit score/report to help make a decision when you apply for a product, but it is not just based on your score. Most institutions have automated internal systems that have different criteria that can change month to month. One lender may accept you and one lender may decline you with the exact same credit score.

How can I see my score/report?

You can now apply to get your statutory credit report for free from Equifax, Callcredit or Experian. You can also use a free service like Clearscore or Noddle. It's not uncommon to have more than one credit report to make sure that all the information matches.

Do you have any information or tips on credit scores? Let me know in the comment below or contact me here.