Credit scores (also called credit ratings) help lenders make decisions. When you apply for a loan, mortgage or other credit, lenders don’t just look at the information you provide. They also ask one or more credit reference agencies to check your credit history. That helps them determine whether or not to provide the loan.
Here’s how your credit score is put together:
Agencies will also normally report on payday loan activities, and whether there’s any record of fraudulent activity against your name.
Once all the information has been received, lenders allocate points according to their own systems and preferences. The total number of points is your credit score.
It’s not only about risk assessment. Naturally, lenders want to know if you’re likely to be able to repay any credit offered. However, they also want to know if you’re likely to be a good customer for them. So they’re looking for information about how you manage credit card repayments, for example. Or whether you’re likely to be a customer for the other products they have to offer.
You can certainly request information about your credit history from the reference agencies a bank uses. But your credit score is calculated differently by every lender. It may even vary depending on the product you’re applying for.
Yes. Credit scoring is based on past borrowing but it is also wise to think about how you use credit now. Lenders want to know how you’re likely to behave and they’ll get the best insights if they have both recent information (6-8 weeks) and historical information.
There are a few things you can do to improve your credit score:
The following information doesn’t appear in your credit history:
Remember though, if a lender asks you about any of the above on an application form, you must answer truthfully. The lender will be able to check your responses.
This article is intended as general advice only which is not intended to cover specific circumstances and needs. The information in this article is also not linked to any of the products offered by Clydesdale Bank PLC.