When you apply to borrow money through a credit card, a loan or an overdraft, the lender will usually credit score your application.
Credit scoring works by awarding points based on the information you provide on your application form. The lender may already have information about you, based on previous accounts you have with them and on your credit report. Lenders use all this information to try to calculate how big a risk they are taking by lending you money and whether you can afford to repay it.
If you do not score enough points to reach the lender’s pass mark, they may turn down your application, offer to lend you a smaller amount than you were hoping for or charge you a higher rate of interest.
Every lender has their own scoring system but you will usually score more points if you have a permanent and secure job, own your own home and / or have lived at the same address for at least a year. If you have a good credit history due to repaying other credit agreements on time or being married or in a civil partnership, will also work in your favour. However, you definitely do not have to be all of these things to be accepted for credit.
Although having a good credit history will improve your chances of borrowing money, having existing loans can count against you if you already have a large number of loans and credit cards. Similarly, you could also affect your chances if you regularly make minimum repayments and have high outstanding credit card balances or have made lots of different loan applications recently.
Baines and Ernst Ltd