Credit Scoring

When you apply for a credit card, loan or any type of finance the lender will look at your credit score or credit rating as it is also known as. Although contrary to popular belief there is not one score. Each lender will score on their own check list.

The way they gather this information is to ask credit reference agencies. There are 3 major credit reference agencies and these are Equifax, Experian and CallCredit.

Lenders will ask one or more of these agencies for information about your financial history when ever you apply for a credit card.

The information these credit reference agencies gather is: where you live, who you live with or share a house with, any CCJ’s you may have and last but not least bank records.

You will also complete an application form when you apply for a credit card and this information is used in conjunction with the information they gather from the credit reference agencies. With all this information they then create a credit score.

So you see there is no one credit score for any one person as the bank may use different credit reference agencies and have their own specification of an ideal borrower.

The credit scoring is not just whether or not you can be trusted to pay your credit card statement each month it is also there to work out how profitable a customer you will be.

People who pay there whole credit card bill each month and never leave any over to pay another time are unprofitable. You will never pay interest and therefore they will not make them a profit. In fact if a credit card company has a lot of customers like this it can cost them, as for every credit card account it costs the bank a small amount to keep this account. Statements have to be sent out plastic cards have to be produced and customer service call have to be anwered. For this reason people like this can often be turned down for credit cards. So to sum it up credit scoring is about can you be trusted and will you make them money.

If you would like to see your credit reference you can buy it. But do not be conned it to paying more than £2. The law is if you write to them with a list of your past address along with a £2 cheque they are obliged to send you your credit reference.