There are many facts – and, needless to say, myths – circulating about credit ratings. Lots of us are afraid of our credit ratings, thinking that it can affect our lives in such drastic ways. But whilst it’s true that a less-than-stellar credit rating can affect your application for a loan, credit card, or mortgage, there is no need to think of your credit rating as the be-all and end-all of your existence.

Here, then, are a few facts and myths about credit ratings that everyone should know about:

First things first: there is no national ‘blacklist’

We’ve all heard so much about the term ‘blacklist’ that the mere mention of it fills us with dread. But in reality, there is no ‘blacklist’ at all. The United Kingdom does not have a so-called universal credit score or rating, and, aside from this, the UK has no existing list of individuals who are ‘banned,’ either. The fact is that every lender will score you in a different way – and in secret. So even if a lender has refused you or rejected you, this does not mean that other lenders will follow suit. Of course, however, if you have a poor history of repayment, then it follows that lenders will not easily approve your application. There are other types of lenders, though, who actually specialise in lending to individuals who have had credit problems in the past.

 

Your credit score does not just point to your past behaviour

All of you who have a credit history will know that lenders will do a credit check on you to see your credit history. But the purpose of credit scoring does not just end there – it is not only about your past behaviour; it is also a way of predicting how you will behave in the future when it comes to repayments.

Lenders will try their best to make predictions regarding your future payment behaviour. That being said, even if you have a poor credit score or rating, this is sometimes better than having little history of credit, because it makes it more difficult for lenders to make predictions about your behaviour if they don’t have anything to base it on. The key is to build up as much credit history as you can – even if you have late payments or missed payments in the past, as long as you have made up for it and do not do it again, lenders will take more kindly to your application than if you’ve nothing to show at all.

Sometimes, it’s also about lenders predicting that you will not ‘make them any money’

Some individuals may certainly be confused when they get rejected, especially if they have a good or nearly perfect rating or score and have never been late for a payment. But sometimes, it’s not only about your credit rating or score – it’s also about whether or not you will make the lender any money.

Here’s how it works: for instance, if you have credit cards and you always make it a point to pay the complete amount that you owe every month, you may still get rejected. Why? Because you are not seen as a profitable consumer. In fact, a profitable consumer is someone who is always, always in debt, but who always meets their card’s minimum amount of repayment. So what can you do if this is the case? Basically, nothing much. You can’t really influence a lender’s image of the ‘perfect customer’ because each lender will have a unique vision of this. But there is one thing you can do to boost your chances: speak with a mortgage broker from firms like Flagstone.co.uk, as they have inside information on many lenders and may be able to match you with the right lender for your needs. You can learn more about the company’s invaluable services by visiting Flagstone.co.uk.

 

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