What is a credit rating?
When you apply for credit, responsible lenders will want to make sure you can comfortably afford to manage your borrowing. Your credit score helps them to asses what risk you represent.
A lower risk = a higher score and a higher chance of getting credit, often at a better rate.
How credit scores are calculated
Each lender calculates credit scores differently. They give a mark to each piece of information based on past experiences. The total of these marks makes up your credit score.
Your credit score can change over time; paying off a loan could give you a higher score or missing several payments could reduce it.
What is a credit report?
A credit report is held by a credit reference agency and includes your current credit agreements, any existing loans, credit cards or overdrafts you might have and your payment records.
There will also be public record information about you, your electoral roll details, court judgements and whether you’ve ever had a history of insolvency.
Your credit report will then be passed on to your lender who makes their own decision.
When you apply for credit you give permission to your lender to check your credit report. Banks, money lenders, utility companies, landlords and employers might also check your credit report.
For free, impartial advice on your credit rating and what goes into your credit report, visit the Money Saving Advice Service.