What is a...

Credit Rating

A Credit Rating is a broad measure of your creditworthiness, which is your likelihood of defaulting on a credit agreement. Lenders tend to favour customers with higher Credit Ratings, as they carry the lowest level of perceived risk.

There are many factors that can influence a finance application, so you are never guaranteed to be accepted, regardless of your Credit Rating.

How do I check my Credit Rating?

You can use checkmyfile to see your Credit Rating based on information from the three main UK Credit Reference Agencies: Equifax, Experian and TransUnion.

Most importantly, you’ll also get access to your Multi Agency Credit Report, which is the information that your Credit Rating is based on. You can try checkmyfile free for 30 days, and then just £14.99 per month.

How are Credit Ratings calculated?

Credit Ratings are usually based on the information found on your Credit Report, such as your account repayment history and court records, and much more.

Positive information – such as a well maintained credit account – will generally improve your overall Credit Rating, while negative entries like late payments or defaults will hurt it.

Consumer Credit Ratings are a broad (or ‘coarse’) class of credit scores, which in turn determine risk. They are usually measured with a five-star rating, where one-star relates to those with adverse credit history and five-star ratings apply to customers with an excellent credit history with little risk of defaulting on payments. Average risk consumers have a three-star Credit Rating.

In general terms, the five levels of consumer Credit Rating are as follows:

One Star: People new to credit or who struggle with impaired credit, able only to access sub-prime credit offers at approximately twice the cost of the average rate.

Two Stars: Those rebuilding credit and with adverse credit recorded alongside good credit history, able to access all sub-prime credit and a small amount of mainstream credit, usually at around 150% of the average cost of credit.

Three Stars: This is the average Credit Rating and is the target area for most credit card companies. Those in this Credit Rating can borrow at average interest rates.

Four Stars: Often older consumers or those with a long-established and history of good payments. Able to access most types of credit, usually at around 80% of the average cost.

Five Stars: Stable consumers with an impeccable credit history. These consumers are often known as ‘super accepts’ and can access credit at between 50%-80% of the average cost.

Why do I have different Credit Ratings?

Any Credit Ratings that you find online will be subjective interpretations of the information on your Credit Report. That means that each service you check with will likely calculate your Credit Rating differently, resulting in different ratings wherever you check.

There isn’t one true Credit Rating – they’re just useful measures to understand your creditworthiness at a glance.

It’s important to note that lenders will not see the Credit Ratings you get online; instead, they will assess the information on your Credit Report to reach a lending decision.

For this reason, your Credit Report itself is highly valuable – much more so than a rating. Checking your Credit Report will let you spot any negative entries and errors, so you can understand what information is helping and hindering your creditworthiness.

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