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How are credit ratings measured Home > Bad Credit Loans > How Are Credit Ratings Measured
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Fair Processing Notice

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Evolution Money Ltd, Progressive Money Ltd and Evolution Lending Ltd are all wholly owned subsidiaries of Darwin Loan Solutions ('the Group').

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How important are credit ratings?

How are credit ratings measured?

Credit ratings play a huge part in many financial decisions people make throughout their lives. From being approved for a mortgage on your first property to securing a finance agreement on a vehicle or loan, your credit history can often affect the options available to you from lenders in a range of financial products.

As you may know, those who have a good and consistent history of meeting credit payments on time are often more likely to be approved for larger amounts of credit and providing the agreement is affordable, lower interest rates. Simply put, a higher credit score indicates a lower level of risk on the lender’s part.

Many lenders refuse finance agreements or loans to customers with poor credit history, however at Progressive Money as a direct lender, we’re able to offer a lot more flexibility, and are often able to provide loans to customers with a bad credit history.

No matter what current position you’re in with your credit rating, it’s important that you understand how credit ratings work, how they are measured and most importantly how they affect your ability to borrow money.

That’s why we’ve created this handy guide, to explain exactly how credit ratings are measured.

How credit ratings are calculated

Credit ratings (often referred to as ‘credit scores’) are determined by several categories of information in your credit report. Your overall credit rating is a combination of all categories, delivering one ‘total’ final rating; as each aspect or category within your credit report changes (positively or negatively), so will your overall rating.

It’s worthwhile to note that each of the credit ratings agencies have their own scoring system, so ratings may not be consistent across all of them.

Let’s inspect each of the categories below, to get a better understanding of exactly what a credit rating is made up of.

Payment history

It stands to reason that if a lender is reviewing your application for a loan or finance agreement, they’d want to see some evidence that you’re likely to meet the agreed repayments. While there is always some degree of risk involved on the lender’s behalf, checking a customer’s credit file will reveal details on their payment history.

These records will inform prospective lenders about the borrower’s past ability to repay their loan or finance agreement on time and therefore give an indication of their ability to repay future credit.
Any late payments, defaults, bankruptcies or County Court Judgements (CCJs) can all have a direct impact on the payment history section of a credit report.

If your payment history is holding you back from being accepted for a loan with lenders, you may wish to apply for one of our bad credit loans. At Progressive Money, we’re able to offer loans to many customers with bad credit, offering longer repayment terms so you can pay back the loan in a way which suits your budget.

Existing debt

It’s perfectly normal for a customer to have some existing debt while applying for loans or finance agreements; a lot of the time this can work in their favour if the debt is of a affordable level, and the customer has a good payment history record.

On the other hand, there are often cases where the customer has a number of different finance payments going out of their account each month and may wish to explore one of our debt consolidation loans, which may allow them to reduce and simplify their monthly outgoings into one simple affordable payment.

While the overall amount you owe will not reduce, the number of monthly outgoing debt repayments could be reduced significantly. By offering you an extended term over which to repay the loan, you can pay out a smaller amount each month (although you should be aware that the total overall amount to be repaid may be higher).

Amount of credit history

Having a credit history allows a potential lender to look further into your financial past and see your record of making repayments over time. For people who have a long history of bad credit or no credit history at all, this may have a negative impact on their credit score

Simply put, a history of making timely repayments on financial products helps build a positive credit rating.

The electoral roll

Being registered on the electoral roll is also a factor as it allows potential lenders to validate your stated place of residence.

Number of applications and credit checks

The number of credit applications on your record can also affect your credit rating. There are typically two kinds of credit check a finance provider can conduct, a ‘hard search’ and a ‘soft search’.

A hard search will leave a footprint on your credit file and inform potential lenders that you have applied for credit in the past. If a prospective lender sees a number of hard searches conducted recently, this could be an indication that you are either applying for a number of financial products at once, or you have been turned down for a number of financial products recently.

A soft search will leave a footprint on your credit file, but won’t have an impact on your credit rating in any way. These checks are often less in-depth but can usually reveal enough about a customer’s eligibility for a loan or finance agreement.

At Progressive Money, we only use a soft search to check our borrower’s eligibility for a loan. If we’re able to offer a loan in principle and the customer is happy to move forward, we then conduct a hard search to finalise the loan agreement.

Credit variation

Having different kinds of credit accounts can work in a customer’s favour because it shows they are experienced borrower and able to maintain and manage a variety of credit (e.g loans, credit cards etc). While this isn’t necessarily one of the most significant factors that determine your credit score, it can help paint an overall picture of the customer’s ability to manage their finance repayments.

At Progressive Money, we specialise in loans for a wide variety of customers. As direct lenders, we’re able to lend money on a more flexible basis, we don’t solely rely on credit reports, we look at personal circumstances  and have loans suitable for those who have a bad credit history or who wish to consolidate their debts into one simple monthly payment.

For more information, you can easily apply for a loan from Progressive Money by clicking the ‘Get Quote’ button or calling our qualified advisors on 0161 814 9383.

We specialise in loans for people who may have been declined credit in the past.
We always take the time to fully understand the needs and circumstances of every customer.
We are the direct lender for all our loans, so you know we have complete control over what we loan you.
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No Guarantor Loans

A no guarantor loan is a type of personal loan that does not need to be undersigned by someone else. A guarantor can help you get a loan by promising to take on the payments if you can’t make them. But with a no guarantor loan, you don’t need to ask someone else to take on that responsibility.

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Debt Consolidation Loans

If you’re struggling to keep up with payments on a number of debts, a debt consolidation loan lets you borrow money to merge them into a single monthly repayment. It helps reduce the number of monthly outgoings and means you can get a better handle on your finances.

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