When you borrow money, whether that’s for a loan, mortgage, credit card or mobile phone etc a lender is assessing what the risk to them is (i.e., what is the chance they will get that money back) and they answer this question by looking at your past behaviour as they believe this is a strong indicator of how you will behave in the future. Known as your credit history.
Now, for example, if you have missed payments in the past, had defaults or ended up getting CCJs (county court judgements) or you have no history because you have never taken out any credit, then if your application for credit is accepted it is likely you will be offered more expensive products to compensate for this risk.
It’s important to consider that each lender assesses this risk based on its own criteria of what a profitable customer looks like, so just because one lender declines you, that’s not to say another one will too.
So, where can you find out your credit score?
in the UK there are 3 main credit reference agencies. Experian, Equifax and TransUnion all offering you a credit score based on different sets of criteria. These credit scores should really only be treated as an indicator at best, because as I have already mentioned, each lender has its own idea of what a profitable customer looks like to them.
However, what you should pay your attention too is your credit file. Now at each of these three agencies you have what is called a credit file. This details all your credit transactions, so your mortgage, any loans, credit cards, mobile phones etc, how well you repay these and whether you have had any CCJs and debts recorded.
I would recommend checking your files at regular intervals to ensure that the information on them is correct and error free. I review mine six monthly and before planning any major credit transactions. I have included the Alfa Mortgages affiliate link below to ‘check my file’, where you can obtain a report from all these three agencies.
https://www.checkmyfile.partners/5H5LTZ8/2CTPL
Right, you have now got your credit score and have reviewed your 3 credit files and it doesn’t look pretty! Don’t despair! Follow Alfa Mortgages 10 top tips in the infographic that will help you to improve your credit score!