What is a credit check?

When you apply for credit most businesses will turn to a specialist company for information on your financial circumstances before lending you money. This check helps the lender decide if you can afford to repay the amount you wish to borrow. A credit check will tell the lender how much money you have borrowed i.e. loans, mortgage, pay weekly catalogues etc. It will also show a history of whether you pay your bills on time and if not; do you have court judgements for non-payments of debts, been declared bankrupt or have an individual voluntary agreement.

What is a credit score?

A credit score is a system used by lenders to help them decide if you qualify for credit. Based on your personal financial circumstances the system calculates a score which represents your credit history. Your score will help the lender understand how likely you are to manage repayments on any credit you are applying for. Normally the higher the score the better chance you have of obtaining credit. However, most lenders will use your credit report as an aid to help in their decision, so whilst you may be refused by one, another lender may choose to lend to you but at a higher rate of interest.

How to improve your credit score

Your credit score can affect your ability to open a bank account, obtain a credit card, loan or mortgage, pay weekly catalogue and even a mobile phone contract or pay monthly car/house insurance. It is always advisable to check your credit score on a regular basis and there are many companies that can offer you free access to your credit report. Should you find your credit score is affecting your ability to obtain credit, the problem may be fixed over a period of time by following the steps below.

What affects your credit rating?

  • High levels of existing debt
  • Continually miss or make late payments
  • County Court Judgements
  • Applying for credit with multiple lenders all at once
  • Mistakes on your credit file
  • Not using credit card accounts you have opened
  • Not being on the electoral register

How to improve your credit rating, short and long term

  • Make sure you are on the electoral role
  • Cancel any unused credit cards
  • Pay on time, every time
  • Prioritise credit applications
  • Do not withdraw cash on a credit card
  • Join a free ‘credit check’ company and monitor your credit file, always reporting any errors
  • Only apply for credit on what you can afford and make sure you can cover all repayments should your circumstances change


Further information and advice can be found at www.stepchange.org