What is Credit Scoring?
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1Your ‘Credit Score’ is a number derived from the information on your Credit History held by a Credit Reference Agency, to help prospective lenders determine in their view, your creditworthiness.
2Potential lenders create their own credit score based on information they get from Credit Reference Agencies and other sources, to determine whether or not to give you credit, what level of credit to give you and the interest rate(s) they will charge.
3Each lender has its own system of Credit Scoring – there is no single standard of evaluation. In determining your credit score, they will use the information held on your Credit History.
Your Credit Score
Your Credit Score is a number that sums up the credit information on your Credit Record. Lenders often use the credit score and the financial history in your Credit Report to decide whether they consider you a good or bad credit risk. It may also help them determine what interest rate to give you.
Credit Agency Credit Score
Credit Agencies like Experian or Equifax will often calculate a credit score for all adults in the UK. Your score takes into account information from the electoral roll, insurance companies, lenders and other public sources. Different Credit Agencies have different Credit Scoring systems and will often give you different Credit Scores.
Credit Issuer Credit Score
When you apply for credit, lenders will typically calculate a Credit Score for you, based on the information in your application and your Credit Record. Your Credit Score is determined by each separate lender making their own judgements on this information. There is no such thing as a standard Credit Score, a universally agreed credit rating system or a credit blacklist.
That means if one credit issuer declines your application, it doesn't automatically mean another one will. They all score you differently even though the information they use from your Credit Record to reach that judgment is the same for every credit issuer.