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What your score’s likely to be
When you apply for credit, responsible lenders want to make sure you can comfortably afford to manage any new borrowing.
To do so, they calculate a credit score – this helps them to assess the chances that you will be able to repay what you owe. People with a high score are usually seen as lower risk, and are therefore more likely to be granted credit (possibly at better rates).
Calculating your score
Lenders calculate the score using information from several sources.
- Your credit report contains information on your past credit history as well as information that confirms your identity.
(If you join CreditExpert, you can check your credit report whenever you want).
- The lender will ask for further information on your credit application – for instance, why you need to borrow the money, and your employment circumstances.
- If you’re an existing customer, they may also use what they already know about you.
Credit scores do not take account of gender, religion, race or ethnic origin.
To work out the score, lenders give a mark to each piece of information, based on their past experience. The total of all these marks is your credit score.
Different lenders give different credit scores
Because lenders have different past experiences and expectations, they take different factors into consideration and score things differently. And the same lender may score a mortgage application differently to a credit card.
Your credit score changes when your credit report does
Credit scores also change over time, as your circumstances change. For example, paying off a loan could result in a higher credit score, while missing several repayments could reduce it. It’s always a good idea to check your credit report before applying for credit.
There is no magic number
Just as lenders use their own formula when calculating a credit score, they also set different thresholds for accepting an application. These thresholds can also vary according to the type of credit you want, so you could be accepted for an electricity or mobile-phone account but have a request for a car loan rejected. And lenders specialising in, for instance, lower-income consumers may grant someone credit when another bank refuses.
Improve your credit score
You can get an idea of your credit score by taking a free trial of CreditExpert. As a member, you can order your Experian Credit Score for just £5.95. It’s based on your Experian credit report – and you’ll get guidance on how to improve your Experian credit score.
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