What exactly is a credit score?
Even if you don’t think that you play the credit game, everyone’s got a credit score. In an nutshell it tells potential lenders how likely it is that they’ll get their money back if they lend it to you. The trouble is it’s not as simple as looking at whether or not you’ve been well-behaved with your plastic or your overdraft in the past. If you’ve been refused the best loan rates or even been turned down for credit, there could be a few factors at play.
The credit reference agencies use a range of information and different categories to determine your creditworthiness, or “credit score”. Each of the categories makes up a percentage of your score. Here’s the breakdown on what weight the reference agencies give the categories they look at:
35% – Late payments, repossessions, bankruptcies;
30% – Your total amount of debt;
15% – How far back your credit history goes;
10% – What type of credit you’ve got;
10% – Checks on your file and new credit applications.
If you know where you’ve been a bit naughty with your credit in the past then making amends and tidying up your credit score will go a long way towards getting you access to the lowest loan rates, and better APRs on any credit you need.
You can check your credit file for free at the below places: