Know how your credit score is calculated and what are key elements of a credit score. Lenders assess your loan eligibility on the basis of your credit history.
Credit score calculation is one of the most common questions we often ponder upon. With 3 major credit score providers operating here in the UK, what makes the credit score calculation even more tricky is the fact that each organisation puts greater emphasis on certain aspects to create your score than others. So, it’s not surprising that your score will vary from provider to provider. Find out myths associated with credit score here.
The simplest way to explain what goes into building your credit score is to look at each element separately as they all work to create a bigger picture of your financial situation. Each credit score company sees certain elements as more important than others do, but one thing they have in common is that they all use the list below to provide you with your credit score.
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Loan Amount
£4000 -
£20000
Norwich Trust
Loan Term
1 -
10 years
4.8/5
Representative APR
31.90%
Minimum Age
21 Years
Representative Example: £12,000 over 66 months, 31.9% APR fixed. Monthly payment £358.22 Annual interest rate 28.01% fixed. Interest payable £11,642.52. Total repayable £23,642.52.
4.8/5
Norwich Trust
Loan Amount
£4000 -
£20000
Loan Term
1 -
10 years
Representative APR
31.90%
Minimum Age
21 Years
Minimum Income
£2000 per month
Representative Example: £12,000 over 66 months, 31.9% APR fixed. Monthly payment £358.22 Annual interest rate 28.01% fixed. Interest payable £11,642.52. Total repayable £23,642.52.
Loan Amount
£5000 -
£100000
Evolution Money Loans
Loan Term
1 -
20 years
4.5/5
Representative APR
28.96%
Minimum Age
18 years
Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00
4.5/5
Evolution Money Loans
Loan Amount
£5000 -
£100000
Loan Term
1 -
20 years
Representative APR
28.96%
Minimum Age
18 years
Minimum Income
Not mentioned
Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00
Loan Amount
£1000 -
£10000
1Plus1 Guarantor Loans
Loan Term
1 -
5 years
4.4/5
Representative APR
39.90%
Minimum Age
18 years
Representative Example: Borrowing £3000 over 36 months with a representative APR of 39.9% (variable),the amount payable would be £134.21 a month,with a total cost of credit of £1831.56 and a total amount payable of £4831.56.
4.4/5
1Plus1 Guarantor Loans
Loan Amount
£1000 -
£10000
Loan Term
1 -
5 years
Representative APR
39.90%
Minimum Age
18 years
Minimum Income
Not mentioned
Representative Example: Borrowing £3000 over 36 months with a representative APR of 39.9% (variable),the amount payable would be £134.21 a month,with a total cost of credit of £1831.56 and a total amount payable of £4831.56.
Personal Information
Lenders want a clear picture of who you are and your current personal situation. So, your credit score is calculated by capturing data on your address, marital status, if you have any dependent children, your salary and whether you rent or own your own home.
Credit History
Lenders always need to assess risk when lending money to anyone, so they use your financial behaviour in the past to decide if you’re a good candidate for lending in the future. People with manageable levels of debt that service the outstanding amount on a regular basis have a good credit score.
Likewise, people who are struggling to make repayments and are missing payments are riskier for the lenders. And are likely to be given a lower score given their financial history.
Enquiries
Those with lower numbers of enquiries into their credit file are seen as being in better control of their finances. Whereas those who are receiving regular searches are cause for concern.
Lenders always conduct ‘hard’ enquiries to check out prospective borrowers credit history and suitability for credit. And they can have a short-term impact on credit scores. If you have a large number of enquiries into your history, this is perceived by lenders as your seeking yet more credit, which can be worrying.
Therefore, the amount of enquiries on your account in the last three months is always taken into account when creating your credit score.
Public Records
Credit scores also look into public records to see if you’ve been subject to bankruptcy, CCJ’s or insolvencies. And there’s no hiding from this information if it exists in the public domain.
If you are registered on the electoral roll, it is seen as positive for your credit score. Hence, make sure you keep this information up to date should you move home.
Check here for a detailed article on how to build a good credit score.
