What is a credit score?

Credit scores and credit reports matter because they are used by financial institutions to help them decide whether to offer you credit and at what rate of interest.

Some of the information held in your credit report will come from lenders you have borrowed money from in the past and some from those that you currently owe money to.  Other details it will show are things like any payments that you have missed, credit applications you’ve made, whether you have been declared bankrupt or entered into an Individual Voluntary Arrangement (IVA) and whether you have County Court Judgements (CCJs) listed against you.

Other information will come from publicly available sources such as the electoral register.

There is also a lot of information that you may be surprised to learn is not included in the report. No one will see your criminal history or your bank account balances for example. There are also certain types of liabilities that are excluded from your financial record, such as student loans, parking fines and council tax.

Your credit report can only be accessed by you or by someone with your permission, which you grant to lenders when you apply for a loan. If you would like to find out how to access your credit file, take a look at our how do I check my credit rating page.

There are two types of searches that can be made on your report; a ‘soft’ search and a ‘hard’ search.

An example of a soft search is when you check your own report via one of the credit reference agencies. Whilst soft searches are noted on your report, lenders generally can’t see them.

An example of a hard search is when you make an application for credit such as a loan. This can be seen by lenders and it will affect your credit score. The more hard searches you have recorded on your file, the more detrimental it is to your overall credit score.