How Does Credit Scoring Work?

We often here about credit scoring but there seems to be a bit of a mystery about how it actually works. It can be useful to get an idea about this though as you will then be able to make sure that you do what you can to make your credit score is as good as it can possibly be. So, a good start is to know how it works and then you can do what you can to make it as good as possible.

How Does Credit Scoring Work?

Credit scoring actually does not really exist. All of us have a credit report which has our financial details laid out in it. Then different people might look at it to decide whether they want to take us on as a customer or lend us money or whatever. Unfortunately, each of them has a different way of deciding this and there is not a standard scoring system that can be used which will allow us to see where we stand. This makes it more difficult for us, especially when we know that some lenders, for example want to see that we repay everything on time all of the time and some might be happy if we miss a few repayments as they will know that if we do that when they are lending us money, they will be able to charge us a fee and that means they will make more money from us. This therefore means that it is not easy to know exactly what to do in order to make our credit record look really good. However, there are a few common sense things that we can try.

How Can I Make Mine Good?

It is wise idea to make payments and repayments on time and in full. Although there is a chance that some lenders may not mind if we do not do this, it is a good idea to make sure that you do make them on time. This is because you do not want to have to pay the extra charges that will come about if you are late with paying them. You do not want to risk paying something late and paying the charge just in case one lender might be okay with it. It is far better to pay things on time as more lenders or others looking at your credit report are likely to want to see that.

It is also important to check your own credit report and make sure that it is correct. Sometimes it can have incorrect information on it which might be used against you. For example, you may find that there are details of a loan, which you have actually paid off or things like that so just check it and get anything changed that is incorrect.

If you do not have your name on many bills, then you will not have much evidence of making regular payments which might work against you. Therefore, it can be wise to have your name put on to things like utility bills and insurance premiums so there is evidence of you paying things. However, only do this if you are confident that the bill will always be paid on time as having evidence of things being paid late is going to work against you. Generally, it is the case that if you do things that advantage you money wise, such as paying things on time, paying off loans early and not borrowing too much money, then it will look good on your credit report as well so this is worth bearing in mind.


I have had a lot of experience in writing about money. I have written several books on it and used to have a blog as well. I have also written for lots of finance sites. My aim is always to make sure that I pass on my knowledge of money to help other people. I want to make sure that people all have as much information as possible so that they are able to make the right decisions when they are thinking about spending, saving and borrowing money so that they feel in control and make the right decision for them.

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