What is a credit rating? –
A credit rating/credit score is a number which tells businesses how good you are at repaying money.
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Credit scores usually go from 0 to 999. A higher score is good and means that businesses are more likely to lend you money.
“Credit Reference Agencies” decide credit scores.
Credit reference agencies look at how well you’ve repaid money in the past e.g. a phone contract, to decide your score.
Equifax and Experian are some of the main credit reference agencies used by people in the UK.
Why are credit scores important? 🤷♀️
Credit scores are important because:
- It can make borrowing money cheaper if you have a good score, and more expensive if you have a bad one.
- Problems on your credit score can last for six years.
- It can impact whether or not you can borrow money to buy a house with a mortgage.
- It can impact whether lenders will let you borrow money or not.
What is usually included in credit score? 📝
|Things usually included||Things not usually included|
|Applications forms that you send to borrow money from the business||Parking fines that you’ve paid|
|Credit reference agency files e.g. information from Experian or Clearscore||Council/Property Tax you haven’t paid|
|County Court Judgements (CCJs)||Criminal records|
|Information about how you’ve dealt with the business in the past||Savings accounts|
|Account information from other organisations you’ve borrowed money from||Your medical history|
So that’s it! Hopefully you’re feeling more confident about what a credit score is.
If you know any friends or family members who might benefit from learning about credit scores, feel free to share it with them!
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