A credit score is the score that a credit provider will use to help them decide which customers to lend to. It’s broadly based on three sets of information:
- your application form
- your credit report
- any information they have about you already.
Credit providers will often use an automated process – known as credit scoring – to objectively assess this information. The ratings they use are different from the credit score a credit referencing agency will provide.
Guide credit scores are created by credit reference agencies. They’re based on the information included in your credit record, and are only available to you. They’re designed to help you understand how firms might use your credit information to decide whether to offer you credit.
Guide scores only offer a general indication of how likely it is that firms might offer credit to you. Having a high score doesn’t guarantee any particular lender will actually offer you credit. This is because each firm uses its own criteria, which might vary depending on which credit product you’re applying for.
The information held on your credit report and your credit application form might be used to decide:
- whether to offer you credit
- how much credit you’ll be offered
- how much interest you would be charged.
The most recent information on your report will have the most impact. This is because lenders will be most interested in your current financial situation.
However, information about your financial transactions over the last six years – good or bad – will still be on record.
If your credit report shows a few missed payments, you might be charged higher interest or you might not qualify for some products. This is because firms believe they would be taking a higher risk by offering you credit.
As well as potentially affecting your access to financial products, a very poor credit history can also affect your ability to get things like insurance or access mobile phone contracts.
Your credit score is an assessment by a particular lender of how much of a credit risk you are. This is based on their own criteria and usually includes information from a credit reference agency.
A credit reference agency might also provide your ‘credit score’ for a fee. But this is just an indication based on the information they hold. It isn’t the same as the individual lender’s score. (Your credit score is different to your credit report, which you can access for free.)