Credit Scoring

How Does Credit Scoring Work?

We often hear things about credit scoring, but there are still a lot of us that do not really know what it is. Therefore, it can be a good idea to make sure that we do know what it is and how it works and then we will be able to have a better understanding of it all.

Credit Records

A credit record is a collection of information about you. It is held by three different companies and it will list different things which certain people will look at to make decisions about whether to take you on. The information will include any CCJ’s that have been held against you, details of loans that you have outstanding, details of missed payments on loans, contracts or things like utilities. It will also have details of regular payments that you make as well as your salary and whether you are registered to vote. This information is used by different parties in different ways and it is important to make sure that it makes the right impression.

How Others Score You

You will find that although you are not given a specific credit score, those looking at your credit record will be looking to see whether they can trust you financially. They will want to see whether you are able to make payments. This is because the people that check will be lenders, landlords, insurers and people like this. They all rely on you making regular payments to ensure they get their rent paid, loan repaid or just the money that you owe, paid to them. Therefore, they will want to see evidence that you will be able to do this.

They will all have different ways of judging you though, which means that it can be pretty tricky to know what you should be doing to keep them happy and to make them want to take you on. There are things that will put them off though, such as any recent CCJ’s, lots of missed payments, being consistently turned down for loans and lots of loan applications. However, it can be a bit trickier with other things. They do like to see that you are capable of making regular payments and so even if you are paying your electricity bill on time each month, then this can go in your favour. If you have had loans and always made the repayments, this will also be helpful. However, it is thought that there are some lenders that like borrowers to have missed a few repayments. This is because they know that if that happens, they will be able to increase the charges and that will mean they profit more from you. However, other lenders do not feel that way and they want to see you making all repayments. It is best to make the payments if you can because you will be better off that way and will avoid the extra charges associated with missing payments. However, it can mean that if you have missed a few payments in the past, you may not need to worry as that will not necessarily mean that you will be overlooked. However, it is good to try to make sure as much as possible is in order so that you do not look like you are out of control.

It is also important to make sure that your record is correct. There may be mistakes on there which could lead to you being unfairly judged. Sometimes, for example, when you have paid off a loan, it can still show as outstanding on your record and look bad. So do make sure that any errors get corrected so that you are not unfairly judged based on it.