Credit Score – What does it mean?

A credit score is not the same as a credit rating or history. All three factors have to be considered by lenders assessing an individual’s loan application and suitability for a loan.

Credit companies require information from potential borrowers to determine a credit score and rating.  The credit score is used by lenders when deciding about lending money for all types of loans: from mortgages to payday loans.  From the information provided, criteria are matched and the credit score is determined.

The credit score is an indicator of an individual’s worthiness to qualify for credit.  Lenders use credit scores to apply credit limits and interest rates, whether for a long or short term loan. Lenders are required by the FCA to credit check individuals before they are approved for a loan. Companies offering products like payday loans with no credit check should not be trusted.

Loan terms are based on an individual’s credit history.  Part of the information entered within credit applications counts towards their credit history.  Other factors contributing to credit history and affecting an individual’s credit score are: how past financial obligations were managed; how present financial responsibilities are met; and whether there are defaults on loan payments. It can be difficult to obtain money if you have a low credit score and less than perfect credit file, but with PiggyBank you can apply for a loan for bad credit as we consider more than just individual’s credit scores.

Credit reference agencies provide individuals with credit reports detailing their credit score and rating.  The credit reports provide information used to determine the credit score, and these include both financial and non-financial information. When individuals would like to improve their credit score and rating, they may use the credit report to gain details about their credit history.