Understanding Credit Scores and Credit Reports: A Borrower’s Guide

There is no question that your credit score plays a very important part in whether or not you get approved for the loans you want. Many people only have a very vague idea of what a credit score is and what it means. Because it is such a big factor in getting loans, you should make a point of learning all you can. This information can go a long way towards helping you to get the loans you need with minimal hassle.

Credit Reference Agencies

We will start off by discussing CRAs or Credit Reporting Agencies. There are three of these such agencies in the UK—Equifax, Experian, and Callcredit. These companies are in charge of keeping your individual credit reports and modifying them based on your credit activity. They take all of the information on your reports to generate a score, which is your credit rating. Lenders use these numbers to determine the eligibility of applicants.

Finding Out Your Credit Score

Credit scores range from 300 to 850 in the UK, and you can find out what your score is by going online. There are certain websites that you can use to do this, but you need to do your research. Make sure that you only use reputable, secure websites to get a copy of your credit report.

Equifax’s Report and Score service charges a small monthly fee, but you can take advantage of a free month-long trial. Some of the websites that offer this service are free while others will charge you something. You can get a free copy of your TransUnion or Callcredit report through their service, which is known as Noodle.

Experian gives people the ability to access their credit report for free through the Money Saving Expert Credit Club. You also have the option of getting the CreditExpert service for a monthly fee.

Why You Have Different Credit Scores

Because there are three different credit reporting agencies, you naturally have multiple scores. These scores are changing all the time based on numerous factors. Not all lenders report to every single CRA, but some do. You need to keep in mind that all three of these agencies have different maximum scores. Experian has a max score of 999, Equifax is 700, and Callcredit is 710. A lot of people go into a confused panic when they find out they have different scores, but it’s nothing to worry about. Just make sure that all of the information in your credit report is 100% accurate.

Do all Lenders Run a Credit Check on Applicants?

Yes, at least all legitimate lenders will run a credit check. You have probably seen a lot of lenders advertise “no credit check loans”. The truth is that they most likely do run a credit check, but bad credit is often accepted. Some lenders don’t pull applicants’ credit with all three of the major agencies. This is something that differs from lender to lender. Credit is something that almost always affects your ability to get a loan to some degree. A lender will consider your credit report as a whole before rendering a decision regarding your application.

Why Should I Check my Credit Report?

There are a couple of good reasons that you should get into the habit of checking your credit report on an annual basis. While it is true that credit report mistakes are pretty rare, they do still happen. It is important that you catch any errors on your report so you can get them taken care of as soon as possible. If you have unknowingly become the victim of fraud or identity theft, your credit report could be seriously affected. Checking your report will let you know if either of these things has occurred.

What is Included

You should know exactly what is or should be in your credit report. When you look at your report, you will see basic personal details like your full name, current address and birth date. You will also see whether or not you are registered with the electoral roll at the address you currently reside at.

All of your late payments will also appear on your credit report. Other things like missed payments, bankruptcies, and county court judgements are included as well. All negative marks are featured in this report, and they all impact your overall score.

What is not included

There are certain things that are not included in your credit report, such as your annual income, medical history, criminal record, student loans, and savings accounts.

Improving Your Credit

If you have a very low credit score, the good news is that there are plenty of effective ways to raise it. Make sure that you pay all of your bills on time consistently. Getting a credit card or loan and paying it off by the due date can also help you improve your credit score dramatically.

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