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What is a good credit score?

Written byKoyo Loans
Last Updated26th October 2022
Contents
  • In 30 seconds…
  • Introduction
  • What is a good credit score?
  • What is a credit score?
  • What is my credit score? 
  • What is a bad credit score?
  • What affects credit score?
  • What are the credit score companies?
  • Conclusion

In 30 seconds…

Understanding your credit score is crucial if you want to borrow money. Your credit score is a reflection of your credit history and informs lenders of how reliable you are as a borrower. Each credit bureau in the UK – Equifax, Experian, and TransUnion – scores credit in different ways, so what is ‘good’ with one agency is not necessarily ‘good’ with another. Your credit score is influenced by a range of factors, and it’s helpful to know how to improve it before applying for any form of credit so you’re likely to be approved.

Introduction

When you apply to borrow money in the UK, lenders regard your credit score before deciding whether or not to approve your application. While most people know they have a credit score, it’s often misunderstood. Below, we explain exactly what a credit score is, why it’s important, and what affects it. By the end of this piece, you will have a clear understanding of why your credit score is so important, and where you can go to view your score before submitting a credit application. 

 

What is a good credit score?

There are three credit bureaus in the UK, and they all have different scoring methods. Therefore, you will need to ascertain which agency has provided your score before discerning what is regarded as a good credit score. 

At Experian, an excellent credit score is anywhere between 961 and 999, while a good score is between 881 and 960. At Equifax, a good credit score is between 420 and 465, while an excellent credit score is from 466 to 700. Finally, TransUnion regards anywhere between 628 and 710 as an excellent credit score, while 604 to 627 is thought of as a good score. 

Although the bureaus have different ways of scoring, they all consider the same factors when reviewing your credit file. Ensuring your file is up to date and meeting your monthly repayments on time will help to improve your credit score while missing payments and applying for multiple lines of credit in a short space of time will have a negative impact on your credit file.

What is a credit score?

A credit score is a reflection of an individual’s credit history. It indicates to lenders how reliable you are when it comes to borrowing and repaying money and is scored on a scale of very poor to excellent. 

In the UK, there are three credit bureaus that issue credit scores – Experian, TransUnion, and Equifax. Their role is to securely hold data about you and your financial history, which they compile in a credit report. They use this information to generate a credit score that reflects your credit history, which they then share with lenders upon request. Each bureau has its own scoring system, which can be slightly confusing when you’re looking to discover your credit score for the first time. 

Your credit score is really important because it will influence how likely you are to be approved for credit. Being responsible with your finances and making your repayments on time will improve your credit score and will make it easier for you to borrow money in the future. You can check your credit score by contacting one of the credit bureaus directly.

What is my credit score? 

Your credit score is a reflection of your credit history issued by one of the UK’s three credit bureaus. When you’re seeking to borrow money, the lenders that you apply to will check your credit score before deciding whether or not to approve your application. 

To find out your current credit score, you can apply for a statutory credit report directly from one of the UK’s credit agencies. Under the terms of the Consumer Credit Act 1974, all consumers have the right to access a copy of their credit report. So, before applying for a loan or any other form of credit, it’s worthwhile requesting a copy of your credit report so you can understand how your application is likely to be viewed by lenders.

If you find that your credit score isn’t as high as you would have hoped, you can work on improving it over time before submitting an application. People with better credit scores are more likely to be approved and are typically offered lower interest rates as a result. You should also check that your credit report is up to date and free from errors.

What is a bad credit score?

A bad credit score is a negative assessment of your personal finances issued by one of the three credit agencies in the UK. Again, each agency scores differently, but a bad credit score is typically classed as poor or very poor. 

At Experian, a very poor credit score is between 0 and 560, while poor credit is scored between 561 and 720. Equifax considers a poor credit score to fall anywhere between 0 and 438, while people with fair credit scores fall between 439 and 530. Last but not least, a very poor credit score with TransUnion is between 0 and 550, while poor is between 561 and 565.

Although not impossible, you will find it difficult to be approved for credit if you have a poor or very poor credit score. Therefore, if you have a poor credit history, it’s best to apply to a lender that utilises Open Banking, which is a safe and entirely secure way of providing lenders with access to real-time financial information. Instead of relying solely on your credit score, lenders will consider your current personal finances, which may help you access credit that would be otherwise unavailable to you.

What affects credit score?

Your credit score is affected by a broad range of factors. Primarily, your history of making debt repayments is one of the most important determinants of whether or not you will have a good credit score. 

Some things you can do to positively affect your credit score include staying within agreed credit limits and keeping your balances low, regularly meeting your repayments, and checking your credit report for inaccuracies. You should also register to vote at your current address if you haven’t done so already, as this also influences your credit score. 

It’s equally as important not to apply for multiple forms of credit in a short space of time, as this might be seen as a sign of financial distress by lenders. Being too close to your credit limit and missing payments can also negatively impact your credit score. Ultimately, being smart with your finances and sticking to the repayment terms that you agreed with your lender will help you improve your credit score. 

What are the credit score companies?

In the UK, there are three credit agencies – TransUnion, Equifax, and Experian. They are known as credit reference agencies and are responsible for compiling information that will form your credit file, which enables them to issue a credit score. 

As explained, each of the credit agencies has its own scoring system, meaning your credit score will vary from bureau to bureau. You can request a statutory credit report from each of the bureaus by visiting their website. Doing so is worthwhile, as you can check your report for inaccuracies and request for your details to be changed. 

Mistakes on your credit file can affect your ability to access financial products such as personal loans, credit cards, and other forms of credit, so it’s essential that your file is up to date. Although your credit score will vary from agency to agency, the same factors will affect the way your credit file is scored. 

Conclusion

Understanding your credit score puts you in a good position before applying for credit. Most lenders perform a hard check on your credit file before approving your application, so it’s important that you understand if you’re likely to be approved before applying. If your credit score isn’t as you expected, you can always take steps to improve your score before submitting an application.

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Key Takeaways

Your credit score indicates your creditworthiness to lenders. It’s really important as it will affect your chances of being approved for credit. Therefore, it’s a good idea to contact one of the UK’s three credit bureaus to find out your score. Once you have it, you can set a plan in motion to improve your credit score before applying for a loan. 

You should also be aware that multiple factors affect your credit score. Your history of making debt repayments and keeping your debt utilisation ratio low are both important, as is restricting the number of credit applications you make in a short space of time. It takes time to work on your credit score, but doing so will increase your chances of being approved for a credit application. 

To find out your credit score, you can apply for a statutory credit report from Equifax, TransUnion, or Experian. This will provide you with a breakdown of your credit history and will help you identify ways to improve your score. Ultimately, this is best practice before applying for credit and saves you from making futile applications if your credit score is bad.

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