Published: 29/06/2022

Credit scores and credit ratings

As coronavirus has played havoc with many people's finances over the past couple of years, everyone should make time to review their credit report and score. Credit reports are important!

It's not just about whether you can get a credit card, loan or mortgage. It also affects, amongst other, mobile phone contracts, monthly car insurance, bank accounts.

Credit ratings shows how likely a typical lender would be to offer you credit.

When applying for credit – such as a loan, credit card or mortgage – the lender tries to predict your future behaviour based on your past performance. Credit scoring is pretty intuitive. Just consider whether you'd lend your money to someone who doesn’t repay?

In figuring it all out, lenders check lots of different data. This may include how much you owe, how many applications you've made recently, what credit products you've had and whether you paid them all off on time. Some data comes from their own information, but usually they will also consult credit reference agencies Experian or TransUnion, who hold much of this data on you.

There is a lot of misinformation and misunderstanding about credit ratings. Some of it's because lenders don't want it understood, and credit reference agencies want you to think it works a certain way so they can sell you extra products based on your concerns.

We’ll try to remove some of the mystery about credit ratings and scores:

Credit reference agencies:

The credit reference agencies have lots of information about your past behaviour, including your payment history to credit card, loan and mortgage companies, past applications for credit and whether you're on the electoral roll. Lenders use this data as part of their decision-making process whether to grant you credit.

Credit history:

This shows your past behaviour with credit, such as whether you've paid lenders back on time. It’s not a numerical score. It's the term for a more subjective look back.

Credit report or credit file:

This is the amalgamation of your data as held by each of the three credit reference agencies.

Credit score

(specifically from a credit reference agency): This is simply a view from one agency. They aren’t the decision maker whether you'll get credit or not. Lenders use their own scoring systems.

Credit score or credit rating (where we're not talking about a score from a credit agency):

This can be used interchangeably speaking casually with credit history. Technically speaking, it is how each lender sums up your credit history with its own score or rating. Lenders use numbers, rankings and other means to judge customers. Every lender has its own rules that are not used market-wide by others.

It's important to note, that your credit history impacts your creditworthiness but you don’t have a uniform credit score or credit rating.  There's no one credit rating or score that is a market-wide judge of your creditworthiness, and there's no blacklist of banned people.

While individual credit reference agencies may give you a score, that is simply their view of your history, sometimes as a means to sell you that verdict as part of a subscription service.

Yet the agencies just collect data that they share with lenders. It's lenders that make decisions whether to give you credit and each lender scores you differently and secretly, and their scores are far more important. 

1Plus1 offer personal loans backed by a guarantor, subject to both the borrower and guarantor meeting our affordability and credit worthiness criteria.

If you think you may be interested in a 1Plus1 Loan, please give us a call on 0330 1200 313 and one of our friendly staff will be more than happy to discuss the process with you, or start your application here.