The importance of understanding how your credit score works

According to a recent BBC report (, almost all UK adults have a credit rating produced by one of the three main credit reference agencies. This, coupled with the fact that we live in a world which is increasingly dependent on credit, highlights precisely how important it is for consumers to fully understand how their credit rating affects the ability to obtain credit, and how scores can be improved in order to facilitate easier access to credit – whether it’s a mortgage, automobile financing, or a loan to help keep things ticking over.

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In this article, we’ll take a look at what a credit score is, and how it determines an individual’s access to credit.

What is a credit score?

Credit, by definition, is money borrowed under the premise that it will be paid back (in full, and often with interest) within a specified time period. Lenders use credit scores as a method to work out the probability of a potential customer paying back the funds they wish to borrow.

Credit scores are worked out by credit reference agencies, by scrutinising the credit payment history of an individual, the length of their credit history, whether they have any outstanding debts and how often they make new applications for credit, amongst other criteria. Since different reference agencies use different criteria, it’s possible that an individual’s credit score may differ slightly from agency to agency, although the main risk factors in each application are likely to remain the same.

Why is a credit rating important?

In an increasingly cashless society, many of our transactions are based on credit. Something as innocuous as a missed payment on a mobile phone contract can have repercussions when it comes to obtaining credit for more important purchases, such as vehicle financing or even a mortgage. Poor credit can prevent an individual from being issued with a credit card for everyday purchases, and some banks may even be reluctant to allow those with extremely poor credit to open a current account, although such circumstances remain rare.

Whilst most creditors do their best not to shun those with less than exemplary credit scores, it’s important to remember that lenders are faced with a certain degree of risk when providing credit. Consumers with poor credit ratings provide a greater deal of risk, which ultimately means that they face paying higher premiums that someone with a good credit score – often drastically so – highlighting the importance of keeping a keen eye on your credit rating.

How do I improve my credit score?

The first step to improving your credit rating is to obtain a current copy of your credit score from CreditExpert.  The information contained in an Experian credit report is typically available on a 30 day trial basis, and provides all relevant information, including your individual credit score (ranging from 0-999) and an outline of your credit history.

This information is the blueprint for making improvements to your credit score. Regardless of whether it involves arranging to fulfil any outstanding repayment agreements or simply rectifying errors on your file, gaining access to your credit report can provide you with the insight needed to begin making positive changes.