A Credit Rating (also known as a Credit Score) is issued by a credit agency and is used to estimate your credit worthiness.
Every time you apply for credit, be it car finance, a personal loan or even a mobile phone contract, your details are checked by the lender with one of three major credit agencies. These agencies hold a wealth of information about your financial history, including any credit agreements you have been in previously, any missed payments on previous finance agreements, and any times you have been refused credit in the past.
There are five key categories of credit rating: Excellent, Good, Fair, Poor and Bad. If you have paid back debts on time and managed your credit well, you will generally be seen as having a good credit rating. If you have defaults, CCJs or any other adverse credit marks on your credit file, you’ll probably have a bad credit rating and could find it harder to get accepted for future credit.
Your credit rating is analysed and assessed in a number of ways.The number of searches on your file, traceability of your previous addresses, being on the electoral roll, and how much credit you already have access to are tracked by the credit agencies. This is then used to calculate your credit rating. Each agency calculates their credit rating in a different way though, and there’s a chance that you'll get differing results when applying for credit, based on the credit agency the lender gets their information from.
Further to this, individual lenders will also assign you a credit score based on their specific criteria for lending. There’s a possibility that even if Experian say you have a high credit rating, and you meet repayments and have no CCJs, a lender could have different criteria for their ideal customer. You can check your credit rating by signing up to online services from major credit agencies such as Experian, Equifax and CallCredit.
Please note that the credit ratings these services give you are not what lenders see - it is for your information only to give you a quick and easy way to gauge your credit worthiness before looking deeper into your credit file.
“A credit rating is an evaluation of the credit worthiness of a debtor, especially a business (company) or a government, but not individual consumers. The evaluation is made by a credit rating agency of the debtor's ability to pay back the debt and the likelihood of default. Evaluations of individuals credit worthiness is known as credit reporting and done by credit bureaus, or consumer credit reporting agencies, which issue credit scores.”
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