⭐Getting declined for a loan? Read this article to understand what credit reports and ratings are, how lenders use them, and how you can increase your credit score.⭐
Often, when a loan application is declined, it is because of the applicant’s credit score. Your credit score is contained on your credit report – and what’s on your credit report plays an important part in determining whether you can get a loan.
In this article, LoanTube team will explain what credit ratings and reports are, what they’re used for, and how you can increase your credit score.
Maximise your options: Compare and apply for loans below with LoanTube
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Loan Amount
£4000 -
£20000
Norwich Trust
Loan Term
1 -
10 years
4.8/5
Representative APR
22.9%
Minimum Age
21 Years
Representative Example If you borrow £20000 over 72 months, your representative APR will be 22.90% APR. Your monthly repayments will be £488.36 and the total amount repayable will be £35,161.92.
4.8/5
Norwich Trust
Loan Amount
£4000 -
£20000
Loan Term
1 -
10 years
Representative APR
22.9%
Minimum Age
21 Years
Minimum Income
£2000 per month
Representative Example If you borrow £20000 over 72 months, your representative APR will be 22.90% APR. Your monthly repayments will be £488.36 and the total amount repayable will be £35,161.92.
Loan Amount
£5000 -
£100000
Evolution Money Loans
Loan Term
1 -
20 years
4.5/5
Representative APR
28.96%
Minimum Age
18 years
Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00
4.5/5
Evolution Money Loans
Loan Amount
£5000 -
£100000
Loan Term
1 -
20 years
Representative APR
28.96%
Minimum Age
18 years
Minimum Income
Not mentioned
Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00
Loan Amount
£1000 -
£10000
1Plus1 Guarantor Loans
Loan Term
1 -
5 years
4.4/5
Representative APR
47.80%
Minimum Age
18 years
Representative example: If you borrow £3000 over 36 months at a Representative rate of 47.8% APR and an annual interest rate of 39.7%, you would pay 12 monthly installments of £143.84. The total charge for credit will be £2178.24 and the total amount payable will be £5178.24.
4.4/5
1Plus1 Guarantor Loans
Loan Amount
£1000 -
£10000
Loan Term
1 -
5 years
Representative APR
47.80%
Minimum Age
18 years
Minimum Income
Not mentioned
Representative example: If you borrow £3000 over 36 months at a Representative rate of 47.8% APR and an annual interest rate of 39.7%, you would pay 12 monthly installments of £143.84. The total charge for credit will be £2178.24 and the total amount payable will be £5178.24.
What is a Credit Score?
- A credit score is a tool used by lenders to help them decide whether to approve a loan. This credit score is considered alongside all the other information that you give a lender when you apply for a loan.
- The higher your credit score is, the more likely it is that your application will be accepted. This is because your score gives a lender an indication of how reliable they think you might be at repaying your loans and managing your debts. People with a higher credit score are seen as a lower risk while those with a lower credit score are seen as riskier. To know about myths associated with credit score, click here.
What is a Credit Score Used for?
- A credit score makes up part of the decision-making process that lenders go through when they are determining whether your loan application is going to be approved. This, together with the details on your application form, is then entered into a computer program, which runs a mathematical formula to give a lender an idea of whether it makes sense for them to approve a loan to you.
What is a Credit Report?
- A credit report is essentially your financial CV. It shows lenders all of your current and previous loans, mortgages, and transactions with companies like your gas and electricity provider, your satellite, or cable TV provider, and so on. Beside each company name, a lender can see if you’ve been making your payments on time and in full.
- This helps give lenders a better idea on how likely it is that you’ll be able to make repayments to them. Companies called “credit reference agencies” compile these reports.
The Credit Reference Agencies
- There are three credit reference agencies in the UK, which supply credit reports to lenders. They are CallCredit, Equifax, and Experian.
- Each credit reference agency uses a different method to calculate your credit score. This means, for example, that CallCredit will give you one credit score and Equifax can give you another.
Ways you Can Improve your Credit Score
Because credit scores are so important when you are applying for a loan, it is a good idea to try to improve your credit score whenever you can. It could be the difference between being approved for a loan or declined for one. Here are the five most effective ways to boost your credit score:
- Registering on the electoral roll
Registering to vote improves your credit score. Did you know that many lenders won’t even consider your application if you aren’t on the electoral roll? This is because it helps you prove to lenders that the address on your application is actually where you live. Being easily identifiable is important to lenders because it helps them protect themselves from fraud. Avoid multiple credit applications.
Each full credit application that you make is visible to everyone who looks at your credit report. Too many applications at once can give off the impression that nobody wants to give you a loan – even if that isn’t true.
- Pay down your debts as soon as possible
Anyone who looks at your credit record can also see how much debt you’re in now and how quickly you have paid off your previous debts. The faster you can reduce the amount of debt against your name then the more likely it is that your new application is accepted. This is because it shows a lender that you can pay back any money that you owe and that you can do it to the schedule of payments you agreed to.
- Closing your old accounts
Even if you have opened a new account and cut your card into tiny pieces, the account will still be open until you contact the provider and tell them to close it. As far as lenders are concerned, this is still a possible credit stream that you have access to.
Let’s say that you have disposed of your old credit card but the account is still open. A lender will know that you could easily just order a new card. The reason that they don’t want this is that you could easily be taking out a loan with them in order to pay off your other debts which, in the end, might mean that you’re left with no money to pay off your loan with them.
This isn’t the case for the vast majority of people but the lenders need to protect themselves from borrowers who they don’t think will be able to pay them back.
- Don’t max out all of your available credit
One statistic that is visible to lenders is your “balance to limit ratio”. This is the difference between the amount that you can borrow compared to how much you have actually taken out.
A good rule of thumb here is to only withdraw 30% of the amount of credit that you are entitled to. This gives a lender the peace of mind that you use your existing credit responsibly.
Finding the Cheapest Loan with LoanTube
- LoanTube is different. We try to bring you the cheapest possible rates that are available amongst our partner lenders. Although we cannot guarantee that we will find you a lender, but you really do have better chances of finding a suitable loan with us because we work with multiple lenders.
- How does it work? Our clever computer system compares real-time offers made directly by the lenders. This is all done in real-time and, once we have all the quotes, we will display the offers with their terms and conditions to you, as the same will help you take an informed decision.
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