What exactly is a credit score, and why is it so important? If you’ve been unlucky enough to be turned down for a mortgage, loan or a credit card limit increase, don’t panic – you’re not alone. For many people, this is the first time they learn that they even have a credit score, let alone be told that their credit rating isn’t high enough to grant them the product they’d applied for.
When you apply for any kind of credit, most lenders will need some form of assurance that you are in a position to repay the money they have lent you, including any interest. To help them assess this, they collect information and calculate a credit score. Generally, the higher the score, the lower the risk it is for them to give you credit.
If you make an application for a loan, mortgage, credit card or other form of borrowing, the lender will perform a credit check on you. The credit check will be used to form part of the lender’s decision-making process to ascertain whether you would be a risky borrower and assess your ability to pay the loan back.
