What does your credit file and credit score really mean to you?

Surprisingly, in reality to lenders, your credit score means very little…

Why? Because your ‘credit score’ is simply a number to show a very basic summary of your current financial position, generated by credit reference agencies. This ‘at a glance’ view of your credit file may be handy, but this is NOT the same criteria used by lenders.

Consider this:

Experian rank their credit score from 0 to 999

Equifax rank their credit score from 0 to 600

Transunion rank their credit score from 1 to 5

As you can see, there is already a variance between scores and whether one is right or wrong from a lender’s perspective.

It’s not your Credit Score that is most important, but your Credit Record which is what lenders assess when deciding whether to give you credit and is what should be treated with the utmost importance and care.

When we take out credit, whether a store card, a hire-purchase, a credit card or loan, this is registered on our Credit Record and our conduct of these accounts, along with other personal details, gives a much more in-depth picture of how reputable and trustworthy we are as a potential borrower.

The lender takes other things into consideration, such as whether you are on the Electoral Roll, whether you have had missed or late payments now or in the past, what your overall indebtedness is (how much money you owe altogether) and whether you have a good history of repayments.

Why doesn’t every lender treat me in the same way?

Basically, every lender has their own criteria of what makes a potentially good customer and their risk management is based on this.

Some may take customers who have had an inconsistent financial history, but this may be reflected in the interest rates offered. Others may refuse a loan because of 1 single missed payment on a phone bill 4 years ago.

There truly are no set rules.

Stick to the simple rule of making repayments in full and on time and you will have the foundations of building (or re-building) a good credit history.

It’s important to get registered on the Electoral Roll (a topic which we cover in a later blog) and to determine whether you are financially linked to anyone with a poor credit history. If you are linked by way of a joint account or mortgage, then possibly that person’s poor score may have an adverse effect on yours.

A guarantor loan might be ideal for someone with bad credit. It does not matter if you have had CCJ’s, defaults or missed payments, all that is required is that you can afford your monthly payments and you have a guarantor that trusts you. In the event that you fail to make a repayment, then your guarantor will have to make them for you.

1Plus1 Loans are specialist Guarantor Loan lenders. A Guarantor Loan is a form of loan that requires someone to act as the Borrower’s Guarantor. We offer Guarantor Loans from £1,000 to £10,000, over 1 to 5 years.

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.