Credit Scores And How They Affect Your Ability To Acquire A Loan

Lending institutions use credit scores to assess the creditworthiness of the borrower.

The better your credit rating, the more likely you are to be viewed by lenders as a lower financial risk. When you request a loan, or a credit card, with an impressive credit score in the United kingdom, you get a great chance of being accepted and also get lower interest rates. You can acquire any kind of loan you want when you have a good credit score like payday loan, business loan, and other forms of secured and unsecured loans.

Different credit bureaus judge using various different factors. UK has three main CRA (Credit Rating Agencies).

  • TransUnion
  • Experian
  • Equifax

The above mentioned agencies document your financial and credit history and give you your credit card ratings based on the information. You should always monitor your credit score, make sure it doesn’t drop down.

Good Credit Score Benefits

It is obvious that individuals who have an above-average or a good credit score will reap a lot of benefits. For starters, lenders will not treat these individuals as risks and they will be charged with lesser interest rates.

Here are some of the benefits of having good credit score

Lower Rates Of Interest

As mentioned above, when lending institutions do not see you as high risk as a result of your good credit score, then they will charge you lower interest rates. This will be of great benefit to you, especially when you’re paying your loans back.

High Credit Limits

If you happen to have a good credit rating then the chances of you getting high loan limits is high, this will help you attain your goals soon.

Credit Score Rating Scales

When you request for loans, every lending institution will review your credit ratings from the CRAs and afterwards decide to give you loans. There is no consistent way to measure your credit rating since each lending institution uses a different scale.

Below mentioned is the Experian’s scale of credit ratings, you apply for different types of loans according to your credit score.

961-999 (Excellent)

A credit score anywhere between 961 and 999 is considered to be the best. With this kind of credit score, you will practically have no problem in availing a loan of any kind and you will also be charged with a low credit rate.

881-960 (Good)

A score anywhere between 881-960 is also a good credit score, you will still be able lay your hands on almost any kind of loan you want and you will still be charged with a reasonable interest rate.

721-880 (Fair)

If you have a credit score anywhere between 721-880, then you have an average credit score. But you still can get a good credit limit and a maybe a reasonable interest rate.

561-720 (Poor)

You can still avail loans but you will be charged higher rates of interest.

1-560 (Very Poor)

With a credit score anywhere between 1 to 560, you will not be able to avail most of the loans out there because the lending institutions will perceive you as a financial risk. Your only option is to improve your credit score.

How To Boost Your Credit Scores

There is no specific way of boosting your credit scores, but there are things that you can do to ensure that your credit scores improve.

  • Lending institutions should have no trouble verifying your name and your permanent residence once you register on the electoral register.
  • In order to get a decent credit score in the United kingdom, make sure you pay your credit card bills on time and do not default on the loans. Lenders would most likely see you as a responsible person as well as a low risk.
  • Lower credit usage could improve your credit score. CRAs such as Experian recommend that you keep your credit usage at 25%.
  • You can use new-age solutions like Zolve which offer credit cards for students & immigrants with no credit history in the US.

When you have a decent credit score it is easier for you to build it up, but you should also maintain your credit score and never let it drop. Here are some tips to help you out

  • Defaulting your loans will adversely impact your credit rating. Your loan will mark your account as :

Delinquent Accounts :-Accounts are commonly referred to as delinquents because you make payments after the given timeframe.

Defaulted Accounts :-Accounts are said to have defaulted when people miss a lot of their payments. This impacts the arrangement with the bank, rendering it impossible to show that you are reliable.

  • Maintaining a decent credit score in the UK allows you to obtain loans that you know will be repaid before the deadline. If you apply for too much than you can afford, the odds of going into debt are far greater.

This would be marked out in the County Court Judgment (CCJ) report, which is incorporated in the public archive. Lenders search this index before issuing a loan to the borrower. This data will stay on the CCJ report for up to six years.

  • Close all your credit services you no longer require or use, like credit cards, store cards, mobile contracts and accounts. It’s not sufficient to chop up the cards to terminate the account. You have to approach the respective lender personally to close the account. Since they wouldn’t want you to go, they’ll try and convince you differently, so be ready for that talk and close your credit accounts.
  •  You can also make use of credit builder loans to help you build credit, these loans usually are not given to the applicant when he applies for it. The applicant is only eligible to get that loan when he pays back the loan with the set interest rate. The sole purpose of the credit builder loan is to improve an individual’s credit score.


These are some of the main things you have to bear in mind when you think about applying for a loan. You should always make sure you have a good credit score because good credit scores will help you acquire loans with a higher credit limit and lower credit score which will be extremely beneficial to you when you’re paying the loan back. Just a simple act of paying your credit card bills on time can go a long way in helping you increase your credit score.

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