What is my credit rating used for?

Generally speaking, the main reason that banks and lenders will check your credit score before approving a credit application is to determine how much of a risk you would pose. Your credit score is a reflection of how well you’ve managed your finances for the past six years.

Furthermore, your credit rating is used nowadays for more than just applying for a personal loan or a mortgage. Other areas of day to day life such as mobile phone contracts where your credit score has a major effect on how good of a deal you qualify for.

Another relatively unknown area where credit scores are used are from prospective employers. This is often likely to happen when applying for jobs in certain industries such as financial services. Your credit report can be used to confirm your identity, making sure that you are who you say you are.

Everyone has the legal right to see a copy of their credit report, so you can see how it fares before approaching a lender. You can check yours by consulting a credit reference agency, such as Experian, Equifax or Callcredit, and many of them offer free trials.

When you do see it, check whether there are any mistakes that could negatively affect your rating. It could be that you’ve been a victim of fraud. If you see anything that concerns you, contact the credit reference agency who will either remove the information or tell you why they disagree with your claim.