How to Look After Your Credit Rating - Fleximize

How to Look After Your Credit Rating

We all have a credit rating, but how do you maintain it?

By Emma Meakin

Your credit rating is the basis of a lender's assessment of your application, so it's important to keep it healthy. But how do you go about this? Here we answer 2 common questions:

What is a credit rating?

A credit rating is a score calculated by a credit reference agency such as Experian, Equifax or Trans Union, to name but a few. This score is calculated after a review of numerous factors including:

Whilst the credit score is based on these, it is not limited to them, and these searches can be either very detailed or quite brief, depending on a lender's requirements.

How is your credit rating used?

Lenders use a credit rating differently depending on their internal policy. However these scores are commonly used to assess the risk of lending to you. They allow the provider to gain an insight into your previous account management. Whilst you may feel this is invasive, it really isn’t. All a lender sees is the relevant credit data - this is simply your financial history and not your life story. For example, they will be able to see the number of bank accounts you have, but not what you earn or the name of your pet goldfish.

These ratings alert the lender to your past credit history and flag any concerns which may affect your repayment ability. It is all about assessment of risk on behalf of the lender, providing an understanding of the type of person you are when it comes to repayment. This is why it is vital to look after your credit rating.

To find out what you can do to improve your credit rating, read our next article on the topic.