Credit scores – everything you need to know

Anytime you get a loan, mortgage, a new mobile phone, insurance or a whole host of goods and services that involve paying over a period of time on a contract, the provider will generally look at your credit file to check how likely you are to continue with the payments.

credit history

But what exactly are they looking at and how can you influence it?

What is a credit score?

Each of the credit reference agencies – the four in the UK are Crediva, Experian, Equifax and TransUnion (previously CallCredit) – calculate your score using a variety of information, and there are several ways you can seek to improve it.

Some key pieces of data used to determine your credit score are:

  • Personal data
  • Public records
  • Previous enquiries
  • Your credit history

Each of these elements will be used to calculate an overall credit score that companies use to weigh up whether they should lend you money or not. 

Each company gives a different weighting to different information, which is why your credit score with, say, ClearScore which uses Equifax could be different to the one you get with Experian Credit Matcher. 

Each bureau uses a different score range, so it’s vital you know what scale you’re being scored against.

What’s included in my credit history?

Your credit history covers how you acted when you had any previous credit or other contractual payment agreements such as mobile phones or utility bills. It looks at:

  • If you made the payments on time
  • Did you miss any payments
  • How many loans you’ve had previously 

The way you dealt with previous credit agreements gives lenders an idea of how you might deal with future ones, and this is a big consideration when they’re looking to lend you money.

Did you know that Admiral offers Car Finance?  You can get a no-obligation quote with us, which doesn’t leave a footprint on your credit file, also known as a ‘soft search’. 

You’d only get a footprint on your credit file, also known as a ‘hard search’, if you continued with a full application, this is because we’d have to do a credit check against you to help us decide if we’re able to lend. However, not all car finance companies offer soft searches when getting quotes, so check this beforehand. 

Admiral also offers Unsecured Personal Loans. For us to get your rate and eligibility for a loan, a hard search will be made when applying. 

This means a footprint will be left on your credit file if you choose to apply for an Admiral Unsecured Personal Loan.

Admiral Loans use two credit reporting agencies - Equifax and TransUnion.

Take a look at our guide to find out more about soft and hard credit checks, and what they mean for your credit rating. 

What has a negative impact on my credit score? 

  1. No previous loans - you may think having no borrowing history is a good thing, but it can have a negative impact as there’s no credit history for a lender to review, making you more of an unknown risk
  2. Lots of enquiries for loans in quick succession - every time you apply for a loan or any other product on credit, you’ll be creating a credit search. When this happens, a ‘footprint’ is left on your credit file. Even if you didn’t take the loan, the fact a lender credit-checked you to see if it was prepared to lend to you will remain. The more footprints you have on your file, especially if searches are close together, the worse it is for your credit score, as lenders could, rightly or wrongly, assume that you are building up a large amount of credit in a short space of time. This can mark you down as a higher risk for lending. So, the best thing to do is use one of the many services that now exist which provide an indication of the likelihood of getting a loan without creating a footprint on your credit file. But most importantly, if you’re turned down for a loan, think very carefully about applying for another one straight after as it can negatively impact your credit score.
  3. Evidence of payment issues - County Court Judgements and bankruptcy proceedings, for example, show you’ve had difficulties in repaying your debts in the past, and that’s a major factor for most financial firms.

But it’s not all doom and gloom. By taking steps to ensure you’ve complied with as many of these elements as possible, you should be able to improve your credit record. 

How can I improve my credit score?

To improve your credit score, you need to make sure you’ve got as much positive information available for your credit file as possible. Personal data includes things like your name, address and marital status, which all help companies build a picture of the type of person they’re lending to.

Being on the electoral register is beneficial and should boost your credit score, as many people looking to avoid authorities don’t appear on it, which can give a lender cause for concern.

Having access to this public record data allows a credit reference agency to independently confirm your personal details are correct. Missed payments are a negative sign, but can have a lesser impact the further back they are and the more you can demonstrate that your recent payments have all been made on time.

If in doubt, you can contact the credit reference agencies directly for information, especially if you find something incorrect on your file. 

You can ask for it to be corrected, but you must prove it’s wrong or to ask for a note to be added as to why a payment was missed.

Remember though, different lenders look for different things, so while you may not appeal to one as a borrower, you may appeal to another. Your credit score is simply an indication of how likely you are to get credit in general.

I’m a highly experienced, multi-award winning finance journalist and broadcaster, having worked on The Daily Telegraph’s personal finance desk and in the City office for more than six years from 2000 to late 2006, becoming the deputy personal finance editor in 2004. I was the financial journalist behind the hit Channel 4 personal finance show Superscrimpers and my agency – Moneta Media – is a specialist communications agency, delivering content, SEO and PR for financial services and professional services businesses.

Whatever your plans, an Admiral loan could help