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How to Check My Credit Rating in the UK?

My Credit Rating

When it comes to borrowing money in the form of a loan, a good credit rating is essential in order to easily get approval. The problem is, most people don’t know how to improve their credit rating, preventing them from getting the money they need when facing a financial crunch.

What is a Good Credit Rating?

When people need money, they approach banks for a loan. These financial institutions make money by borrowing money from people who have surplus at low interest and lending it to people in need at a higher interest.

For this banking system to work, it needs to calculate the risk involved in loaning money to be mitigated. For banks to continue to operate, they certainly cannot afford to have people that do not repay the loan at all.

A good way to check my credit rating is to analyse the following activities listed below. 

  • How many loans you’ve taken before?

  • Did you make any late payments on those loans?

  • Did you default on those loans?

  • How many credit cards you have?

  • Have you missed any credit card payments, etc.?

The above mentioned factors are compiled into a rating that tells the bank how creditworthy you are. This is known as a Credit Rating. My credit rating is a number which ranges between 0 to 999. The higher the number, the better my credit rating is. 

Once the bank gets to know your credit rating, they decide whether to approve the loan or not. It’s not very common that banks reject customers with a good credit rating. However, if your credit rating isn’t good enough, you’ll either get a loan at a very high interest rate or you won’t get one at all.

Who are the Agencies that prepare My Credit Rating?

Credit ratings in the UK are compiled by Credit Rating Agencies (CRAs). CRAs get your information from past financial records and transactions. The data that CRAs use to generate your credit rating report include your payment history, credit usage, credit mix and information such as missed credit payments, foreclosures etc.

Depending on the CRA, there are different types of ratings. For example, Experian’s credit rating varies from 0 to 999, with 0 being the lowest. But when it comes to TransUnion’s credit rating, the ranges vary between 300 and 850, the higher the number. The same applies to other CRAs as well.

What are the Factors that Affect My Credit Rating?

Being late on payments 

When you acquire a loan, the first and most important thing that comes with it is making your monthly loan repayments. When it comes to a credit score, there is an enormous weight given to your prior history with loan payments that can affect my credit rating.

CRAs use this history to see if you have been a responsible borrower. If your track record suggests that you are one, then there will be a positive reflection on your credit rating. However, even a single instance of a delayed payment can damage your credit rating significantly. This is why you should always make your loan payments immediately after you get your paycheck. This reduces the chances of you missing your deadline.

Affect My Credit Rating

Defaulting on loans

When someone defaults on a loan, CRAs take note of this and the defaulter will be liable to pay a significant amount in penalty charges. Bad situations like bankruptcy, foreclosure and repossession of your home can have a massive effect on my credit rating. This ensures that no bank will give you a loan due to you being unreliable in paying back your debts. After defaulting on a loan, people will have to undergo the painful process of rebuilding their credit rating.  

Having too much credit card debt 

Credit cards allow us to make purchases when we do not have the cash on hand. These purchases usually come with meager interest rates as long as payments are made on time. However, having multiple credit cards exposes a large risk of not paying back your debt on time.  One can avoid these risks by paying persistent debt.

Having inactive accounts with a small amount of balance 

Having more than one bank account that you no longer use anymore isn’t a bad thing. However, if there are any balances or dues pending to your old accounts, CRAs will use this information when calculating your credit score.  

Performing multiple credit checks

A credit check is performed on your account every time you apply for a new loan. This inquiry can result in a reduction of up to 10% of your credit rating if done multiple times. In addition to this, if you submit more applications one after another and keep getting rejected, the loan provider will perceive you as risk. Banks will come to the conclusion that you are genuinely in need of money to clear other debts and will think twice before they offer you a loan.

Your credit utilization

Credit utilization is used to refer to how much of your credit limit you have used each month. Banks and other lenders look at people with lower credit utilization as lower-risk investments. When CRAs create my credit rating, they reward customers who keep their credit utilization to a minimum with a better credit rating.

Having a permanent place of residence

Where you reside plays a significant effect on my credit rating. Having a fixed place of residence in the UK can be beneficial as banks and other loan providers will sense that you are trustworthy and responsible. Always having to move from place to place can reflect financial troubles and impact your overall credit score.

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