Credit rating, credit scoring – these terms are now common currency, and most people know that they refer to credit, or more accurately, the chance of accessing credit. People often talk about a good or a bad credit rating, as if there were some universal system out there that rates all of us. True, it can sometimes seem like there is some kind of blacklist circulating amongst lenders, particularly if several applications for new credit accounts have just been rejected, but this is simply not the case. What, then, is the value of my free credit score, as offered by CreditExpert?
Put simply, entering the term ‘my free credit score’ into your browser, and then taking advantage of the free trial service provided, is a chance to get an idea of the impression that you make to lenders. The credit score provided by CreditExpert is indicative, and is based on an understanding of the way that lenders assess applications for their products.
Credit Expert is a service provided by Experian, the largest credit reference agency in the UK. Credit reference agencies began life as a way for credit providers to share information about customers, so that more informed decisions could be made about lending. Lenders provide information about how borrowers have managed credit accounts to the credit reference agency. The credit reference agency then compiles these records into one credit report, so that all the credit accounts opened by an individual can be viewed in one file (strictly speaking, not every lender shares information through credit reference agencies, but the vast majority do).
When you apply for a new credit account – be it a personal loan, mortgage, mobile phone or domestic fuel contract – the lender takes your application and the information in your credit report, and conducts a credit rating procedure. Each relevant piece of information is given a score, and at the end of the process a high enough credit score will see your application approved, while scoring too low will result in rejection.
While each lender has their own credit scoring procedures – meaning that most of us, at any one time, have recently received several different credit ratings – there are some fundamental rules of thumb which tend to apply across the board. Late or missed payments will understandably have a negative impact on most credit scoring procedures, while full and on time payment towards credit accounts are likely to have a positive impact on subsequent credit rating procedures. Using this kind of analysis, services like CreditExpert are able to provide an estimated credit rating that indicates how you look, in terms of risk, to the majority of lenders.
It is important to remember that credit ratings result from each application. The credit scoring rules for one product can be different to another, as each system of rules is designed to identify the target customer for the specific product. A simple example of this would be scoring well for a ‘bad credit’ credit card (successful application), but being rejected for a mortgage (receiving a low credit rating for this product).
A low CreditExpert credit score is an indication that you may need to take measures to reverse the effects of a bad history with credit products. For more information on such credit rating repair projects, try looking here.