Quick Information on Credit Scoring

This is a very quick introduction to what credit scoring is and what lenders do when they say that they are assessing your creditworthiness or looking at your credit score and so on.

Essentially for each of us there is a record on file that can tell those that access it about our financial history, and how healthy or indeed unhealthy our financial record is.

The idea is that, in the same way your doctor gets an idea of your physical health by looking at your history of illnesses and so forth, so a financial institution that is thinking of lending you money can get an idea of how good a prospect you are to be able to pay back the money they lend you if they do so by looking at your financial history.

When your lender goes through and makes a judgement or assessment on your application for a product such as a loan, mortgage or credit card, it gives the application a mark, this is called a credit score.

To do this they take into consideration your credit report along with lots of other details like your electoral roll listing and also other information such as CCJs and bankruptcy as relevant.

The scoring criteria and therefore the overall algorithms and models for each companies scoring model are not publicly available but they take into the same broad range of factors and even things like age and number of children are taken into account.

One thing to note is that if your application is rejected for the credit, then it should not just be a case of being told that your application has been refused leaving you mystified and bemused, and sometimes even angry. Rather they should offer you an explanation, indeed they are actually obliged to tell you why your application for the product has been refused, so if no information is forthcoming don't be afraid to ask them for details and rationale as to why you've been refused.

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Quick Information on Credit Scoring

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