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How Credit Scores are Calculated

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How Credit Scores are Calculated

edited 30 November -1 at 1:00AM in Credit Cards
32 replies 5.1K views
bertieobertieo Forumite
12 posts
edited 30 November -1 at 1:00AM in Credit Cards
Before applying for credit I got my credit report online with Credit Report http://www.creditreport.co.uk but I'm not happy with my credit score. :mad:

I've seen a few posts suggesting credit scores are of no real importance but surely they are going to influence a lender or what is the point of them?

Also I can't see any reason for my low score, there is nothing on my file that looks bad to me. Is it likely I will be refused credit because of my bad score and why is it so bad?
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  • CLAPTONCLAPTON Forumite
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    well, what does your credit file show?
    do you already have a credit card?
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  • I believe credit scores are important. I'm not very educated on the subject i'm affraid. I have two nearly maxed out credit cards owing 2k in total.. i'm paying them off next month, clearing this will improve my credit score, if so by how much, 50-100 points, or more?

    Kind regards, Wayne
  • Did the report not suggest anything you could do to improve your score?

    Teh reason people suggest credit scores are unimportant is that
    1. each company scores differently
    2. it's only an internal score - the way that a credit card company scores you mightbe completely different.

    It's only a guide.

    ARe you on the electoral roll? Do you have a cc already? Evere missed a pyament for anything? Any court judgements against you?
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  • Start by reading the article on Credit Scores on this site:
    http://www.moneysavingexpert.com/banking/credit-rating-credit-score
    It goes into this subject in much detail.
    You're spelling is effecting me so much. Im trying not to be phased by it but your all making me loose my mind on mass!! My head is loosing it's hair. I'm going to take myself off the electoral role like I should of done ages ago and move to the Caribean. I already brought my plane ticket, all be it a refundable 1.
  • edited 23 March 2011 at 11:56PM
    Paul_HerringPaul_Herring Forumite
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    edited 23 March 2011 at 11:56PM
    'Credit Scores' as [strike]supplied[/strike] sold are at best[1] only a general guideline to your credit worthiness, and at worst a cynical ploy to extract money from those that don't know exactly what they're buying.

    The actual number supplied by (say Equifax) is only useful if they [Equifax] actually supplied credit (they don't.)

    Sadly, the algorithm/formulae [Equifax] use to determine the number they give you uses different criteria to what (say) Amex, Barclaycard, or your local mortgage lender may look at.

    For example Equifax may give a higher positive emphasis on having a low proportion of debt in relation to the amount of credit you hold, whereas Amex may give a higher negative emphasis for exactly the same reason.

    Some things are generally seen as 'common ground' (presence on the electoral roll, not too many searches in the recent past, evidence of regular income for example,) but are by no means set in stone, nor are the weightings likely to be the same.

    For obvious reasons
    1) The proper credit suppliers don't divulge their formulae to stop gaming of the system
    2) If Equifax were to start offering credit, then I'm sure that either they'd stop [strike]giving[/strike] selling you your 'credit score' or (more likely) would have in the small print something to the effect that your 'credit score' would have little relationship to whether they'd actually supply you with credit.

    [1] Edit 2011/2/16:
    It would seem I omitted the fact that they don't/can't even take into account all the information lenders use, so they cannot give an accurate score. See a the posts from an Experian representative replying on: How is my credit score so low? (Things like whether you have a job; what your income is, etc.)
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  • CLAPTON wrote: »
    well, what does your credit file show?
    do you already have a credit card?
    Yes it does show credit card records. All my payments are on time. I've always been very careful not to miss any payments. That's why I could not understand why my credit score is not good.
  • djwolfdjwolf Forumite
    134 posts
    Good post. I've never had a problem getting a loan or credit card but I never seem to get their best APR rates. I wonder if it's because I'm not a homeowner.

    I'm interested to know how much it affects your rating each time you apply for new credit. Say you applied for 3 or 4 separate loans within a week, is that likely to make the score drop considerably or not? I'm talking about only applying and not actually signing up.
  • Paul_HerringPaul_Herring Forumite
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    Say you applied for 3 or 4 separate loans within a week, is that likely to make the score drop considerably or not?

    It depends.

    Some credit providers may place a high negative weighting on more than X credit searches in the past Y months (for varying values of X and Y,) some may have a sliding scale for any searches, some may not even look at that aspect of your history (though this latter is unlikely.)
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • djwolf wrote: »
    Good post. I've never had a problem getting a loan or credit card but I never seem to get their best APR rates. I wonder if it's because I'm not a homeowner.

    I'm interested to know how much it affects your rating each time you apply for new credit. Say you applied for 3 or 4 separate loans within a week, is that likely to make the score drop considerably or not? I'm talking about only applying and not actually signing up.

    Have you seen your own credit report? If you are not getting the best rates it may not be because you are not a home owner. Could there be something else on your report. My score was low and I am a home owner. But I couldn't see what the problem was with my report.
  • edited 13 June 2010 at 5:29PM
    Paul_HerringPaul_Herring Forumite
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    edited 13 June 2010 at 5:29PM
    If you are not getting the best rates it may not be because you are not a home owner.
    Unlikely that's the sole reason (if it is a reason at all.)

    For anyone who wants an indepth view on credit scoring, you could do worse than read http://stoozing.com/g_score.php - but ignore the stoozing slant to the article, unless that's genuinely why you want more credit.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
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