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Bad Credit - what it means

What does bad credit mean?


When people say they have bad credit, it means their credit report shows that in the past, they may have had difficulty repaying companies for products or services. This could indicate that such individuals may have trouble making re-payments in the future. It could also result in the person being refused credit, whenever they apply.

Thin credit history

You may have moved to the UK from another country and while you may have had credit products in your home country, this credit report may not be available in the UK.  Such a lack of credit history information, can lead to you being refused for certain financial products and services. This is because some lenders won’t have enough information to make their decision.

Credit reference agencies & credit scores

A credit reference agency gathers data about you. They do this by accessing a number of public information sources like the electoral role and census data. They also gather information from companies about your repayment history. 

Through agreements with many companies across the country, the credit reference agencies build a substantial amount of data on UK consumers.  This is valuable information for companies who use it to make lending decisions.

There are three main credit reference agencies in the UK; TransUnion, Experian and Equifax. These credit reference agencies all hold various credit history information about you. 

Credit reference agencies use your credit history information to calculate a “score” for a consumer. This gives an indication of how risky it might be to lend to you. Generally, these scores run from 0-1000 and the higher the score, the better your chances of accessing credit.  

It is also important to note that a lender will rarely use only the score given by the credit reference agency to make a  lending decision. They will usually check the score and combine it with other information you have provided them. Lenders will then run it through their own “scorecard” and make a decision based on this.   

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