When applying for a loan, mortgage, overdraft facility, credit card or any other form of credit, the lender will use your credit score (also known as your credit rating) to calculate whether or not you are deemed to be a good creditor or a risky one.
The exact system for credit scoring is never made public and does vary from lender to lender, and depends on the specific line of credit requested. So it is worth keeping in mind that just because one lender rejects your application, it doesn’t necessarily mean that all of them will.
Your credit score is a quick way for potential lenders to see if you’re a safe risk which enables them to make a decision on whether or not approve you for the line of credit you have requested.
Your credit score doesn’t just dictate what credit is available to you, but it can also dictate the type of credit you can receive. For example you may not be eligible for certain low APR credit services if your score’s too low, and you may be limited to how much you can borrow.
