How does my credit rating effect my loan application?

David Allan

Written by David Allan on October 2, 2013

Updated May 3, 2019

credit_score

If you are worried about your credit rating or that you are wondering how much effect it has on being approved and obtaining a loan then you should read on.

How important is it and how does it effect my chances of getting a credit?

Your credit rating, score and past history is very important and is a “score” that is based upon your credit worthiness and your ability to repay credit you have taken out in the past.

Your credit score is what lenders use to see if you are a “safe bet” and competent at handling your finances correctly.

How does my credit score effect my chances of obtaining a loan?

Your credit score has a big effect on your chances of obtaining a loan or any type of finance such as a mortgage, credit card, overdraft or car loan.

The better your score then the more likely you will be approved for credit now and in the future.

Poor, bad or adverse credit history

Every lender has their own lending criteria and different appetites to risk. The poorer you credit score and credit history then you are seen as a riskier applicant to offer a loan to. The lender sees it that going by your previous history of credit you’re most likely to default on payments in the future. This will make any lender cautious of lending money to you.

The lender would be worried that you will not pay back what is owed or default on payments. This is because the lender can see from your credit file that you have miss-managed your finances and loans in the past.

A bad credit history could result in you either being denined a loan, or being offered a loan that is charged at a higher rate of interest to compensate the lender for taking on a high risk applicant/customer.

A good or excellent credit history

If you have a good history of credit and made payments on time then you have demonstrated that you are competent to manage your finances correctly and will be rewarded with a good or excellent credit score.

An applicant with a good or excellent score is mostly likely to be rewarded with cheaper rates of interest and loans from the main stream lenders and banks.

A good credit score gives you more choice of lenders and cheaper rates of interest. With this is mind it pays to manage your finances correctly or be punished with higher interest changes when you apply for your next loan, bank account or credit card.

What is a good credit score and what is bad/poor?

You can find out more detail on your credit score my signing up to one of the many credit check websites that provide you with detailed information on your credit history.

When you allow us to search for a loan we will also be able to present to you loan offers that are based upon your credit score, historty and file. This means we only present the best deals based upon your criteria and loan affordability.

What are the credit scores – what is the range – and what do they mean?

The credit score ranges from the low 300’s and mid 800’s.

Excellent & Good Credit Score: Your score will be in the range of 715 and upwards of this figure.

Average Credit Score: Your score will be in the range of 610 and 714.

Poor Credit Score: Your score will be in the range of 570 and 609.

Bad credit score: Your score would be in the region of 500 to 569.

If you have a score that is below 500 then you’re really going to struggle to get any type of loan or you’ll have to pay very hight rates of interest.

The higher your credit score the better

In summary the higher you score the better and the less interest you’ll have to pay on any loan.

If you need a loan then please speak to us and we’ll find you the best loans based upon your credit file for both applicants with a good and poor credit history.

This calculator will give you an idea of costs. The exact amount and APR payable will be provided from the lender subject to credit and affordability checks.

Your monthly payment will be:

£136.90

Interest on this loan will be:

£714

Annual Percentage Rate (APR):

3.7%

Total repaid will be:

£8,214

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