Credit scoring is used by lenders as an assessment as to how likely it is that you will repay the money you borrow from them and that you’ll make the repayments on time. The lenders allocate a certain number of points for each piece of information on you, for example, your income, the amount of debt you currently owe and your payment history. Along with the information you provide on your application, these details are used to calculate your credit score.
It’s important to note that different lenders use different scoring systems and they’re not disclosed so although you may be refused credit with one lender, you may be accepted with another.
Lenders will normally consult a credit reference agency to assist with credit scoring. The 3 main agencies in the UK are Experian, Equifax and CallCredit. Between the information on your application and the detail that credit reference agencies hold on you, lenders can build up a profile of the type of customer you’ll be from:
- Your postcode
- Your salary
- Your property
- Previous history with the company
- Electoral roll information
- Your available credit, the amount you currently owe and whether you’ve made your repayments on time
You can request the information the credit reference agencies hold on you for a fee. It’s vital to check that the details are correct including your payment history and your address details. If you spot an error, ask to have it amended immediately.