A person’s credit score reflects their credit worthiness and ability to meet future loan repayments.
Lenders look at an individual’s credit score, provided to them by credit referencing agencies, when reaching a decision on whether to approve or reject a person’s loan application.
The points that make up an individual’s credit score come from information gathered about their credit and financial history, such as: how many accounts a person has; number of accounts in use and not in use; history of making short term loan or bill repayments; meeting contractual obligations such as for credit cards or mobile phone contracts; and details of payment defaults.
It is essential to note that if payments are not met, the record attaches to the individual’s credit history, and reflects in their credit score. Lenders and credit companies use the credit score to determine an individual’s suitability or worthiness for a loan, such as long or short term loans.
An individual’s chance of borrowing money through short term lending may be favourable or unfavourable depending on how they have managed their financial responsibilities previously; their current financial circumstances; whether they are listed on the electoral role at their residential address; and if there are any county court judgements (CCJs) against them.
Where credit scores are low, some lenders may still consider providing a loan, but may alter loan terms and interest rates accordingly. Learning about your credit score and taking steps to improve it most definitely increases the chances of getting a loan with favourable terms and rates.