Understanding your credit score is an important part of making a successful application for credit such as a loan or credit card. When it comes to borrowing it is important to know how likely it is that you will be accepted for a loan or credit card. That is because if you make lots of applications for credit which are turned down, it can make you look desperate to borrow money. This in turn can affect the score on your credit report.
There are three main credit reference agencies, Equifax, Experian and TransUnion. Using one of these agencies will allow you to and see what shape your finances are in.
A credit score is a number that represents your credit rating, letting a lender know the level of risk involved when you request to borrow money. The higher the credit score, the lower the risk to the lender.
If you are keen to check your credit rating, but don't know where to start, take our credit check quiz.
Check your credit report to make sure you're in good shape to apply for loans, credit cards, overdrafts, mortgages and mobile phone contracts
a) I have a mortgage and one credit card, which I pay off every month – I find it is simpler to keep on top of things with fewer accounts b) I've got a car loan, a personal loan and two credit cards – which I usually manage to juggle successfully c) I've got so many cards and loans that I've lost count – I never know when I may need to get my hands on more credit
a) I always pay on time and in full – I've set up direct debits so I never miss a payment b) I generally pay on time, but sometimes I can't manage the full amount c) I skip a month every now and then, when money's tight and I just can't afford it
a) They check your credit report to see your credit history, as well as looking at the information you gave in your application b) They base their decision on your application form and any other supporting documents you send them c) They only care whether you earn enough money to make the repayments
a) Regularly, to make sure it's all up to date and accurate – I don't want a clerical error to spoil my chances of getting a good deal b) The last time I checked it was a few years ago, after I had an application for credit turned down – I don't see why I should bother unless there's a problem c) Never - I don't want to be reminded of how bad my score is
a) My credit rating is good, and it can improve even more if I keep on showing that I'm a responsible borrower b) Credit ratings only show what my position is now - past problems won't show up, so they don't count c) I'm not sure, but I think my credit rating must be OK because I've got so many different credit accounts already
a) I am on the electoral register, I have not missed any payments, and I am never maxed out on my credit cards.
b) I am on the electoral register but I occasionally miss the monthly payment and I sometimes used my credit cards to help with my cash flow.
c) I have had credit issues in the past but I am trying to sort things out now. I have been turned down for loans and cards previously.
a) I have asked for a copy of my credit file and checked to make sure there are no errors.
b) I have tried to pay off more of my debt on time.
c) I have tried to switch credit cards in order to give my finances some breathing space.
a) They think you are a higher risk customer and they make a decision on whether you are likely to repay the money on time. People with a good credit rating are offered a lower rate. b) They want to make more money from their customers. c) They charge you more if you earn more.
• Mostly As - Good credit rating – keep up the good work and remember to make regular payments. You understand how credit scoring works and you are doing all the right things. • Mostly Bs - Average credit rating – you could improve your chances of being approved for a loan or credit card if you made some small changes such as making sure you always meet your monthly repayments and not borrowing up to your limit on credit cards. • Mostly Cs - Bad credit rating – if you are struggling with your finances you can get free help from a debt charity or you could consider using a credit builder credit card to improve your credit history. Alternatively, draw up a debt repayment plan and tackle your debts one by one, starting with the most expensive debt first.
For more information about your credit score and how it impacts your lending, read our guides on credit reports.