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Credit Rating

Credit rating is used by companies to assess the risk involved in lending someone money. When borrowing money there will always be some form of application to complete. Lenders use the information you complete on the form, together with your credit record, to decide whether they will lend you money.

Lenders obtain your credit record from credit reference agencies. The three main agencies are Experian, Equifax and Callcredit. These agencies hold information on most UK consumers. They get their information from:

• Public records – electoral register, bankruptcy orders, county court judgements, repossessions
• Other lenders – details of any credit applications.

Lenders will interpret your file in different ways and score you against the following criteria:

• Your income and outgoings
• Your payment history on other debts
• The length of your credit history
• Any other debts you have
• Accounts opened
• Number of applications for credit
• Number of times your record has been accessed.

This results in your overall credit rating. Even if a certain lender refuses you credit because of a bad credit rating, other lenders may not. Things that will give you a bad credit rating are:

• You have been bad at settling debts in the past
• You have had county court judgments
• You have been declared bankrupt
• You have no track record as a borrower
• You have made too many applications for credit
• You are not on the electoral roll
• You have recently started a new job
• You have been at your current address for under three years

Your credit rating can also be damaged through fraud. If someone steals your identity and applies for loans and credit cards, this will go onto your credit record.

If you are refused credit due to a bad credit rating, it is a good idea to obtain a copy of your credit record. If there is incorrect information you have the right to have this removed and should contact the credit reference agencies about how to do this.