Credit score guide for personal loans

Understanding and managing your credit score can help you make sounder financial decisions. Here's our rundown of what you need to know.

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Exactly what is a credit score?

Your credit score is a rating based on your personal financial history. It helps lenders decide how creditworthy you are. There are three credit reference agencies (CRAs): Experian, Equifax and TransUnion. They take your financial history and use it to put together a credit report. The information in that report is then used to create a credit score for you.

What does Post Office do with my credit score?

Before saying yes to a personal loan, Post Office has to make sure you’re not too much of a risk; that you’ll pay back the loan in full and on time. Post Office contacts agencies like Experian to get your credit score, which shows how well you’ve managed the credit you’ve been given so far.

Why is it important to have a good credit score?

The higher your credit score, the less of a risk you are to lenders. If you use credit regularly and responsibly, it’s likely you’ll have a high credit score. Remember, your score isn’t set in stone. It can go up or down, depending on how you’re managing the credit you have right now. Experian, Equifax and TransUnion have different scoring ranges. Your score might be different with each agency. It’s possible to have two different scores from two different agencies that indicate you’re a good credit risk.


What is a good credit score?

The way different lenders rate credit scores and decide if they’ll lend to you varies. But a good credit score with the main credit scoring agencies will usually mean a good score with the lender too. 


That said, lenders don’t just base their decision on the credit score, so a good score isn’t a guarantee of approval for credit or getting a lower interest rate.


The scoring system for each of the agencies differs too. With Experian, your score’s classed as good if it’s above 880 out of a possible 999. For Equifax, you need to score over 420 out of 700. With TransUnion, the target is 781 or more out of a maximum 850.


How do I check my credit score?

It’s free to access the full credit report and credit score the credit agencies hold on you by visiting their partner websites: Experian MSEs Credit Club, Equifax ClearScore, TransUnion Credit Karma. You can also request a paper copy of your credit report if preferred.


Try to check your credit report held with each of these agencies regularly, at least once each year. Even small errors such as the wrong address can affect your credit score and potentially cause problems when you apply for credit. 


What impacts my credit score?

All sorts of factors, including the number of credit applications you’ve made. That’s why it’s important to check the likelihood of being approved for a loan before you go ahead and apply. If you’re looking at a Post Office Personal Loan, use our Fast Checker to check your eligibility without affecting your credit score in any way. A soft search won’t impact your credit history, and only takes a couple of minutes. What’s more, you can use the Post Office Personal Loan Calculator to see our typical repayment options.

Here are some other factors that can affect your credit score:

  • Your payment history – this includes missed payments, defaulted payments and any County Court Judgement (CCJs), and carries the most weight when it comes to determining your credit score.

  • Your address history – how long you’ve lived at your current address, and any linked addresses you’ve lived at during the past seven years – up to 10 if you’ve been declared bankrupt.

  • Whether you’re on the electoral roll – this helps lenders determine you are who you say you are.

  • Signs of fraud – things like identity theft and card fraud can damage your credit history but you can take steps to repair it. We’ll come to those in a minute.

  • Credit utilisation – how much you currently owe, and how much of your available credit you’re using. If you use a high percentage of the credit available to you, it might indicate that you’re experiencing financial difficulties. It can also potentially damage your credit score.

  • The length of your credit history – how long you’ve had your various credit accounts.

  • Your credit mix – managing a range of accounts like mortgage, personal loan and credit card, shows lenders you can handle different types of debt at once.

Can I do anything to improve my credit score?

It is possible to optimise your credit score. The first thing to do is check your credit report with the three agencies and pinpoint what may be dragging your score down. You can see your score and request a copy of your full credit report at any time. Some services are free, but you’ll need to pay a small fee for others. If there are any mistakes or entries that need to be updated, you can dispute them.


Here are a few simple ways to boost your credit score:

  • Make sure you’re on the electoral roll.

    Lenders look for stability in borrowers. When you register to vote, you go on the electoral role. To get on it, you give details like your name, address, date of birth and your electoral number. It’s an easy way for lenders to confirm your identity and the accuracy of your details.

  • Be more reliable when it comes to paying bills.

    Lenders loan money on the understanding that you’ll make regular repayments. Simply paying your bills on time, every time, will help boost your credit score long-term.

  • Consider getting a credit builder card

    Getting a credit-building credit card can also help improve your credit score. These are credit cards with low credit limits and a higher than average interest rate. The sum you can borrow is therefore low but the interest you pay on what you borrow is high. By paying the balance off in full each month, you’ll not only avoid these higher interest charges but also improve your credit score over time.


5 Key takeaways:

  • Your credit score is a rating based on your personal financial history
  • Post Office contacts agencies like Experian to get your credit score
  • The higher your credit score, the less of a risk you are to lenders
  • Make sure you’re on the electoral roll
  • Be more reliable when it comes to paying bills

Find out more about Post Office personal loans rates.

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