What does a credit score mean?
When you apply for credit, lenders will use a number of metrics to determine how likely you are to pay back the debt, and based on this decide if they will lend to you. Credit is any money that you borrow that you agree to pay back at a later date and could include not only loans, mortgages, overdrafts and credit cards but also hire purchase, catalogue and home shopping accounts, utility bills and mobile phone contracts.
Your credit score is one of the tools used by lenders to assess whether you qualify for credit. It is a 3 digit number based on your historical credit report as well as other information provided on your application such as your job and salary. People who have high credit scores tend to be seen as lower risk which means lenders are more likely to lend to them. People with lower credit scores may struggle to find lenders willing to loan them money or they may be able to borrow but at a higher interest rate. This is known as risk-based pricing.