Secured Loans

How is my Credit Score Determined?

Understanding how a credit score is determined is a useful area of knowledge for customers and people who are getting information on a secured loan. A credit score will determine, when a customer is looking for a loan, the extent to which they will be able to get it and if they are able to get a loan, how much they will should pay in interest. As a result, the lenders are able to make back their possible losses. Simply speaking, a credit score will tell a lender how much they will need to charge a customer in interest in order for them to make a profit.

How are They Determined?

Credit scores are determined by one of three credit ratings agencies which operate in Britain, who will collect information on customers to get an idea of their creditworthiness. Customers should remember that they will have a certain credit score with each one of the companies, and they may be different, as they may weight their judgements in varying ways. Each bank will probably consult one or several ratings agencies so that they will then be able to see how creditworthy a certain individual is, nevertheless, there is no universal list of people who cannot get loans.

Information Sources

Information sources can be of a very simple form, such as the application for a loan. This will contain a great number of details which pertain to the customer, such as the size of their house and their family, as well as their income. Simple income and outgoing calculations will allow credit ratings agencies to make decisions about how much the customer should be charged for their loans. This is why it is important that customers fill in their applications carefully.

There are also some less obvious methods which credit ratings agencies use, such as getting information from the electoral role, which will provide them with more details of the house and occupants etc.. Another source of information which agencies will use is the records from county courts, where they will be able to see whether the customer has suffered bankruptcy, and if they have, the agencies determine that they are likely to suffer it again. In addition, the credit ratings agency will look at the fraud records, which will tell them whether the person who wishes to get a loan has acted fraudulently, which will often mean that they are less likely to pay back their debts.

The ratings agencies will also look into some important account details of the customer, such as the bills which they pay. These bills, and whether they are paid on time, will determine whether the customer is likely to pay back their loan on time and in full, making them more profitable for the company. The agencies will also have knowledge of the mortgage and other loan payments which a customer is making, which will tell the agencies a great deal about the comparative likelihood that the customer will not pay back what they owe.

Overall, the theme of credit score determination and creditworthiness is quite a difficult one, especially as banks do not actually have to publish their credit requirements. All that is left for customers to do, therefore, is to act as carefully as is possible with their money so that they can keep as favourable a score as is possible. In addition, customers have the right to check their credit scores to see how they are doing. In addition, if they notice anything amiss, they should contact the agency to see if they can get it changed.