How does the credit rating scale work?

It’s all very well getting your credit rating. But if you don’t understand the meaning behind the numbers, you won’t know whether your credit history is jeopardising your chances of getting credit.

That’s why we’ve put together this short guide to understanding your credit rating. Because the sooner you understand it, the sooner you will be on your way to a successful credit application.

What is credit scoring?

It’s a score out of five, generated by TransUnion based on the information in your credit file. The rating is generated by TransUnion for your information and reference: it is not provided to lender, as they will have their own criteria for deciding what level of credit risk you pose.

Here’s a brief explanation of what each number on the scale means:

Credit rating 1

This is the lowest rating you can be given and means you will probably find it difficult to obtain credit. If you are able to obtain credit, you may find your interest rates are higher than most people’s.

However, a low rating doesn’t have to remain low forever. You’ll find more information about improving your credit rating or score on our website.

Credit rating 2

A rating of 2 could mean you are sometimes rejected for credit. Similar to people with a score of 1, you may find you are subjected to higher interest rates than most people.

Credit rating 3

This is neither very good nor very bad, but you may occasionally be rejected by lenders. You may also find yourself excluded from the very best deals on the market or offered a higher interest rate.

Credit rating 4

This is a healthy credit rating and signals that lenders may view you as low risk. You’re more likely to be accepted for credit and have more freedom to choose between different credit providers.

Credit rating 5

This is the highest rating you can receive. It’s unlikely that your credit applications will be rejected and you’re most likely to be accepted for the best deals on the market. Creditors are likely to see you as a low risk and if you continue making your repayments on time and using your credit sensibly, you’ll be able to maintain your high rating.

A word of advice: Don’t get your credit rating confused with your credit score. While they are similar, they’re not exactly the same and how your credit score is assessed by lenders is for them to determine, based on the information in your credit file.

How is your credit rating calculated?

In a nutshell, it’s calculated by TransUnion using public and financial information from your credit report.

This includes:

  • Your past and current credit arrangements and how much you owe
  • Late payments
  • The length of your credit history (longer is better)
  • Any bankruptcies or insolvencies
  • Any court judgements made against you
  • Information confirming your identity (presence on the electoral register)
  • Your financial associates (people you have a joint bank account or mortgage with)

Whenever you get your rating from TransUnion, it will purely be based on factual information – never on your gender, religion, race or ethnic origin.

Where can I get my credit rating?

You’ll find it on your TransUnion credit report – a comprehensive insight into your financial history.

And while checking your credit rating regularly is important, it should not be considered in isolation.

After all, it’s just an overview of your financial health. Your credit report, on the other hand, will provide a deeper insight into which areas of your financial profile need improving.

If you’re looking to find more information about your credit profile, click the link below:

Statutory Credit Report – For a basic credit report and to make sure fraudulent activity is not happening in your name, you have the statutory right to access your personal credit information.

Sign up today to see how your credit history could be affecting your credit applications.