Understanding credit scores | TSB Bank


‘Credit scores’ are used by banks to help
them decide whether or not to lend money to someone. They’re usually a number between one and a thousand Whether you realise it or not, everyone including
you, who’s ever had a bank account, paid an energy bill or even had a mobile phone
contract will almost certainly have a credit score. Credit scores are generated by organisations
called ‘credit reference agencies’, who calculate scores using information contained
in people’s ‘credit files’. A credit file is a record of someone’s borrowing
activity, alongside information like whether they have paid household bills promptly and
whether they are on the electoral roll. If someone has a good credit score then it
will be easier to borrow money. If they have a bad score then it will probably be harder
and more expensive. A good credit score depends on a variety of different things. First, banks want to know that you’re who
you say you are. Which is why they check your details on the electoral roll. Once they know who you are, they want to know
whether you will be a responsible borrower. They’ll know that if they can see that you’ve
borrowed in the past, have paid money back in full and on time, and haven’t defaulted
on payments. Actively avoiding borrowing all together means the
banks can’t judge what sort of borrower you might be, so it doesn’t help your score. Banks will also see you as being reliable
if they see you have a history of always making prompt repayments on loans, other debts and
energy bills. That includes credit cards. But how people use their credit card may make
a difference too. To banks, using credit cards to take money out of cash machines can be
a sign of someone who spends more than they can afford. It’s also worth knowing that if you are financially
associated with someone else, whether by sharing a bank account or a mortgage with them, then
their credit score can be linked to yours. So, if you’re associated with someone with
a good credit score, banks might be more likely to want to lend to you, but if you’re linked
to someone with a bad score you could be viewedas a higher risk. Finally, whilst shopping around
for things might ordinarily be sensible, when it comes to things like loans, making lots of applications
can damage your credit score. When you make an application, most banks perform
something called a ‘hard credit check’, which can leave a mark on your credit file.
If there are too many marks it can look like you’re being rejected by lenders, or are
trying to borrow more than you can afford. A way to avoid this is to get quotes from
a bank like TSB which offers ‘soft credit checks’. These checks leave marks that can only be
seen by you and TSB, but not other lenders. Credit scores are a fact of life, but understanding
why they exist and how you can improve yours can help when it comes to borrowing money
in the future.

2 comments on “Understanding credit scores | TSB Bank”

  1. Simon Anderson says:

    what a crock of shit TSB are lying bastards

  2. I love dogs lainey says:

    My dog howles at this

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