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Managing your credit score

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:

  • Your application form provides the foundation of everything else, so it’s vital you get it right.
  • Your history with the lender – they’ll consider any and all previous dealings with you.
  • Credit reference agencies provide information about your credit history on request. The main UK agencies are Callcredit, Equifax and Experian. They pull together information from the electoral roll and court records. They also examine the records of other lenders who have searched your file as the result of a credit application. They’ll look into addresses you’re linked to and any other people you have a financial association with.
  • Account information. Various organisations use credit reference agencies to share details about how you manage your finances. These include credit/store card providers, banks, energy suppliers and mobile phone operators.

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.

What are lenders looking for?

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.

Can I work out my own credit score?

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.

Can I change my credit score?

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:

  • Check your credit report. Make sure it’s all correct. It’s the key part of any credit score, so you need to sort out any mistakes as quickly as possible. Most credit reference agencies offer a free trial period, during which you can check your file at no cost. There are also free for life credit reports available from Equifax (Clearscore) and Callcredit (Noddle).
  • Use one or two credit/store cards responsibly to show lenders you can manage credit.
  • Ensure you make loan payments on time, as missed payments will reduce your credit score.

What’s not in my credit history?

The following information doesn’t appear in your credit history:

  • Student loans started after 1998
  • Council tax arrears
  • Parking or driving fines
  • Who you're married to
  • Declined applications
  • Some types of default or missed payments
  • Reclaims for PPI, CPP or bank charges
  • Whether or not you've checked your credit file
  • Race, religion, ethnicity
  • Savings accounts
  • Medical history
  • Criminal record
  • Child Support Agency payments

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.

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