What Is a Credit Score?
Your credit score is your creditworthiness stated as a three-digit number (0-999). This number represents your borrowings, particularly your repayment behaviour. Always repaying credit in full and on time will give you a high score.
With a good credit score, you’ll find it much easier to get approved for credit facilities including credit cards, car loans, telephone contracts and mortgages. Conversely, a bad score can prevent you being approved, especially by mainstream lenders such as the. Here at 1Plus1 we may still consider you even with bad credit providing you and your guarantor meet out affordability and creditworthiness criteria.
Your credit score comes from your financial history from each of the UK’s three main credit reference agencies (CRAs). These CRAs collate information including details of your credit accounts, physical addresses, repayment history, and financial connections with joint account holders into credit reports.
Depending which CRA (Equifax, Experian, or TransUnion) you check with, you may get a somewhat different version because lenders don’t share the same information with all three main CRAs.
What Goes into Your Credit Score?
Several factors are used to calculate credit scores that help determine your ability to manage credit responsibly. It’s important to know these factors because they can help you to improve your financial profile and consequently your credit score.
Some of the factors that provide an input into credit scoring models are:
- Payment History: How you repay loans and other forms of credit have a big impact on your score. Missed payments raise a red flag, warning lenders about your ability to repay debts on time. Your payment history accounts for about 35% of your score.
- Credit Usage: Your credit utilisation ratio, that shows the percentage of your available credit that you are using, is another important part of your credit score. If you are using more than 30%, lenders will become cautious when advancing credit to you because of your increasing reliance on non-cash funds.
- The Length of Your Credit History: The length of time you’ve held credit accounts in your name matters in credit scoring. Older or long-standing credit accounts will boost your rating and show you up as a responsible borrower. About 15% of your score is derived from this factor.
- Types of Credit Accounts: Having a diverse credit mix will help boost your credit scores as it shows the range of the different types of credit you can handle. Credit accounts such as car loans, credit cards, phone contracts and mortgages are considered among others.
- Recently opened credit accounts: When you apply for credit, lenders often make hard enquiries. When you have too many of these enquiries, they can reduce your score as they imply you may be a risky borrower.
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.