Credit Scoring

Credit scoring is a widely used approach many lenders use to assess the risk of lending money to people. At Credit Expert, we do not use it. Instead, we prefer to take a deeper, more personalised approach.

Nevertheless, credit scoring’s broad usage has implications for people looking to borrow money. For those people who discover their credit score is weak, accessing affordable credit can be a challenge – and that is where we and our personal approach can help.

Before explaining credit scoring, it is essential to highlight that in the UK, people do not have a single credit score. Different lenders and credit reference agencies may operate their credit scores, so people can have multiple credit scores.

Credit scores are created by credit reference agencies that lenders rely on to provide a picture of people’s credit histories for lending decisions. Whenever a credit application is made, data is gathered on your past credit behaviour to help the lender determine what sort of borrower you are.

The information held by credit reference agencies will typically include:

Personal information – relating to your income, employment circumstances, and address. Lenders may also refer to the electoral roll to verify your personal information. It is therefore important to register on the electoral roll at your current address if you wish to apply for credit, whether or not you plan to vote.

Your credit history – lenders want to know if you can maintain a loan on time.

If you have successfully borrowed and repaid through banks in the past, you are more likely to be regarded as creditworthy now. However, if you have had a history of late payments, your credit application may be evaluated less favourably.

Current credit agreements – lenders will want to know about any existing credit agreements you have in place. This will include credit cards, mortgages, and personal loans, as well as how much you use them, specifically for credit cards. It can also include other non-credit items, such as utilities, phone/internet payments, and buy now, pay later agreements.

Stronger credit scores are given to people that lenders can find and see are making their regular repayments on time. In addition, they assess whether they can afford the loan in question.

For individuals with weaker profiles or those for whom only partial records can be identified, their credit score is likely to be poorer. If accepted for credit, they might discover that the interest rate applied to any lending decision is higher to reflect the increased perceived lending risk.