Credit Rating and Credit Scores

In order to be approved for a loan or mortgage you may have your credit rating checked, which means your credit history will be examined. You will then be given a credit rating using a credit score system. Before you can be approved for a loan or mortgage a credit check will be undertaken, which means your credit history will be looked into.

Credit Rating

A credit rating check reveals elements like reliability in paying back any previous loans, employment, marital status, age and address history and these will all be taken into account.
If you have previously taken out a loan and have failed to make payments resulting in county court judgments (CCJ’s ) against you, then you will be classed as a high risk borrower. If you have changed jobs frequently or continuously moved address then you will probably be looked upon as a high risk borrower. Any previous loan defaults, mortgage or rent arrears, bankruptcy, IVA will all affect your credit rating adversely meaning your history will go against you.

Even so, you should not give up - you can still get a loan even after having CCJ’s or arrears and if you keep up the regular payments this can only help you to improve your credit rating for the future. Improving your credit rating will mean you will have less difficulty finding a loan or any type of finance in the future.

Credit Score

Every element of a credit check results in a score. Having been in the same job for 10 years, lived at your current home for 15 years and previously repaid credit back without problems, will all gain positive scores. If you have never had credit, have CCJ's or have no home and are unemployed then these would result in negative scores. All the scores are totalled together to obtain your total credit score or credit rating. Lenders use the credit score to ascertain what level of risk they would be taking by granting you finance. Some lenders will only lend to people with a high score, whilst some will lend to people with lower credit scores.

Poor Credit Rating equals Mortgage Problems

When you are being considered for a mortgage you are credit checked. A credit check looks for CCJ's, Defaults, Mortgage Arrears, Credit History, Bankruptcy, Debts, IVA's and Hire Purchase Defaults. Having one or more of these can affect your credit scores making it harder for you to pass a credit check. It may not have been recently, it could have been years ago or maybe it was not that you were at fault. Unemployment, divorce or possibly an illness prevented you meeting your payments, maybe bankruptcy made it impossible for you to manage your finances and stay out of the red.