How Is Your Credit Score Worked Out?

August 8, 2022

Maintaining a good credit score is more challenging than ever, as the cost of living crisis has driven up the price of key goods and services. However, your credit rating affects your chance of being offered good deals on everything from mortgages, bank accounts, car insurance, and mobile phone contracts, so it pays to manage it well.

Your credit score is worked out from your financial track record, which many lenders use credit reference agencies (CRAs) to check up on. The main CRAs in the UK include Experian, Equifax and TransUnion. They gather data on your recent applications and credit status from banks, credit card companies, mortgage companies, and other creditors.

CRAs will also be passed information by other parties, such as insurance companies, utility companies, and retailers, if you default on payments. Debt collection agencies also pass on information to CRAs. Further data may be gathered from public records, such as County Court Judgements, bankruptcies, and individual voluntary arrangements (IVAs).

The CRAs do not hold information about your salary, savings accounts, student loans, council tax arrears, medical history, or criminal record. Contrary to popular belief, CRAs do not all give individuals the same score, and they do not exclude anyone from their lists.

Ultimately, it is the lender that makes the decision whether to loan you money, using a range of information, and it is not just based on your credit score. Therefore, even if your credit score is bad, it doesn’t automatically mean that you can’t borrow money.

That said, it is a good idea to manage your finances well, as this will make it easier for you to get the best rates and deals when you do want to borrow money, whether that’s for car finance, a mortgage, or any other big purchase.

If you are looking for IVA mortgage brokers, please get in touch today.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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