Credit Rating in The UK: All You Should Know

As a result of statistical calculations, a credit score is a numerical value that helps lenders and financial institutions determine and decide if you are eligible for a loan. Though the terms, credit rating and credit scores are used interchangeably, they can refer to two to different things like in the credit scores, the scores are always based on a set scale and show up in your credit history. Whereas in credit rating it can be another system altogether. It is a point to note that each lender will have his own method of checking that he prefers.

What is Credit Rating in the UK?

A system that is implied by a few financial institutions and corporations to judge the creditworthiness of a business or an individual. Credit ratings can be implied by anyone looking to borrow money. Individual credit scores are often sored by credit bureaus like Equifax and Experian based on a form of the FICO scoring method.

Difference Between Credit Scoring and Credit Rating

Though both terms are used for almost the same purposes and that is helping the lender decide the borrower’s creditworthiness, but there are a couple of notable differences between the two terms. A credit score is typically given in the form of a number and is a way of helping the lender determine if you’re eligible for a loan or not. A UK credit rating is usually in the form of letter grades, they also help a lender determine if you can take a loan or not.

What are Credit Reports?

Credit reports are nothing but the accumulated data lof your credit history and they usually contain the following

  • Personal information
  • Credit searches
  • Payments due
  • Missed out/late payments
  • Financial information
  • Information on the borrower on public registers.

How are Credit Rating Beneficial to Businesses

There are a lot of advantages credit ratings can carry, here are a few of them


When the borrower has a high UK credit rating, it basically assures the lender/investors about the safety of the money borrowed and high ratings always reflect the punctuality maintained while paying back the borrowed sum.


Credit rating helps in saving time spent on reviewing the borrower’s financial behavior. This due to the UK credit rating being checked and done by an external agency that specializes in this field. Thus, the lender can be assured of accurate UK credit ratings and that will help him make his decision faster.

Easy to Understand

The rating scale given and used by credit rating services are easy to understand and can be understood by almost anyone. The ease of understanding makes it a simpler method to use.

Benefit of Reviewing

There are specialized rating agencies that review the credit ratings that review a few particular instruments. So it is up to the investors have the choice of disposing of it or continue with the possession of the instrument.

Affects your Investment Decision

As it is widely known that UK credit ratings help the lenders by giving them an idea of the individual/borrower’s creditworthiness. The lenders/investors with the help of the credit rating system determine who gets a loan and who doesn’t.

credit rating..

Importance of Credit Ratings

It may either be credit scores or credit rating, but both undoubtedly in the UK are used by evaluators to judge your worthiness when it comes to taking a loan and paying it back, but no matter what the end result, it always revolves around “the likeliness of the borrowers paying back the borrowed sum in given time period and with added interests”. If you have a good credit history of borrowing money and paying it back on time, it will definitely be in your favor.

Apart from loans and credit cards, credit ratings that show up on your credit reports can also be used to getting things like the finances for a vehicle purchase, a mortgage, for paying utilities, and many more. There is a credit type for almost anything and that is why lenders also have appropriate credit checking tools in their position.

Thus, if you want to be able to take out a loan for anything without any hassles, then improving your credit ratings is a must.

How to Improve Your Credit Rating and Scores

It important to always be working towards improving your UK credit score, as improved or higher

score always has many benefits, that come with it

  • Higher Credit Limit
  • Reduced Interest Rates
  • More offers

Here are a few tips to help you improve your credit score

Close Unused Accounts

When you have a lot of unused accounts, the lender may think you are not capable of handling large amounts of money and reject your loan application.

Borrow the amount, You can afford to Payback

Following this step may help you not get caught in the vicious circle of debt. It is always important to keep in mind to take only what you can afford. If you do not do so, the finances may get tighter for you, with monthly payments and other costs, it may affect you adversely.

Limited Credit Card Applications

If you apply for credits or loans frequently, lenders may think that you are extremely dependant on loans and credit, which may turn out to be a problem later on. This is regardless of whom you apply with and how much you apply for.

Pay Frequently

Make sure you make frequent payments as it helps in improving your UK credit ratings and also, try not to delay the monthly payments as that will bring down your credit score.