Credit Scoring
Credit scores are used by lenders because they can approach each loan application in the same manner. All credit score methods and practices are updated frequently and is monitored by the office of fair trading.
Every lender in the UK will apply for a credit score for you to find out how much risk is involved if they were to lend you money.
The process of a credit score is based on peoples past records. The loan company will take into account many factors in considering your loan application, these are just a couple of points that they will take into account.
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Your previous financial history - Have you been declined for a loan in the past? Have you paid your bills on time, credit cards, loans and household bills?
- Where you live - This will affect the loan amount and the loan APR that is offered to you. As you may have guessed living in an area that the loan company will favour helps your chances of receiving your desired loan at a more competitive APR.
- Employment - Are you in work? If you are not then you will find it extremely difficult to be able to secure a loan with any loan company. Obviously the more income that you receive will favour a better credit score.
- Your Age - If you are too young or too old this can affect your score also. A younger applicant is more likely to default on payments due to immaturity, while an older applicant may not be able to repay the whole loan before they pass away.
These are just a few examples of how your credit score may be calculated and how your application may be affected.
You will never be told what your credit score is, this is to prevent any fraudulent loan applications that would change details to suit and in turn would receive clearance for a loan they do not deserve.
