How Your Credit Score is Calculated

The way in which an applicant's credit score is calculated by a lender is by listing the applicant's financial attributes on a credit 'scorecard'. Information regarding your job, whether or not you are a homeowner, any assets you have and any information given by a credit reference agency may be included, and each attribute is awarded a certain number of points. Past loans or credit cards and records of any other types of finance that you have or have had will be considered. If the points awarded add up to a number over the lender's credit score threshold, credit may be granted.

However, as lenders each have their own scoring system, being granted a loan by one lender does not guarantee success with another. You will have a higher credit score if you have shown that you can make repayments reliably over a relatively long period of time and are not approaching the limit on your existing credit. Although the credit scoring system is effective in many ways, its main disadvantage is that it discriminates against those with no credit history just as much as those with a bad credit history, which can make it particularly difficult for young people to have applications for personal loans approved.