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A credit score is a number that is meant to indicate how likely you are to repay your debts—in other words, your "creditworthiness." Lenders use credit scores to assess the risk of any potential credit applications, such as loans, mortgages and credit cards. What
A low number indicates that you may have had trouble with paying bills in the past or that you have limited credit history available. A high number indicates that you’ve shown responsible bill paying and debt management over the years.
Prospective landlords, employers, mobile phone companies, banks, credit card companies, and other lenders will rely on a credit score when deciding whether or not to accept an application from you. (They may also use additional information you provide them, which is not on your credit score, such as your salary and employment status.) A low credit score is viewed as risky – the lender will be less confident they’ll be paid back and may decline your application. A high number is viewed as safe, and the lender will be more likely to grant credit.
What is a Good Credit Score?
In the UK there are three main credit reference agencies: Equifax, Experian, and Transunion (formerly CallCredit). They each have their own credit scoring system, which can be confusing as their ranking bands are not consistent. If you know your credit score, but aren’t sure if it is good or not, the following table outlines the credit score ranges for Equifax, Experian, and Callcredit.
|Credit Score Bands
|Transunion (VantageScore 3.0)
|467 and above
|961 to 999
|Low risk; Should be accepted; Lower interest rates
|420 to 466
|881 to 960
|Low risk; Usually accepted to most credit products
|367 to 419
|721 to 880
|Some risk; Credit limits may be low
|279 to 366
|561 to 720
|Significant risk; May be rejected; higher interest rates
|0 to 278
|0 to 560
|High risk; Higher probability you’ll be rejected; Higher interest rates when you are accepted;
Sometimes your credit score category (i.e., good, fair, etc.) will be different at each credit reference agency. This can happen if you creditors don't report to all three credit reference agencies. If this is the case, each credit agency will have different data on which to evaluate you. Additionally, there may be slight differences in how the agencies use this information because they each use their own, proprietary mathematical model to calculate credit scores.
How Your Credit Score Affects You
Your credit score will impact the financial products offered to you, in two ways:
- The likelihood you're approved for a credit card, loan, mortgage, insurance policy, etc.
- The interest rate you'll pay on successful applications
Those with an excellent credit score are more likely to be offered credit, and for the interest rate to be lower. So a higher credit score can directly save you money. Another benefit to a high credit score is that many of the best UK rewards credit cards are only offered to applicants that meet a minimum credit standard. A solid credit score also provides you with a larger range of cards from which to choose.
How is My Credit Score Calculated?
While Equifax, Experian, and Transunion use slightly different mathematical models to determine your credit score, they generally rely on the same types of input information. Some of this data is publicly available and some comes from your creditors, as detailed in the following table:
Information Used to Determine your Credit Score
- Electoral Roll (i.e., are you registered to vote?)
- County Court Judgments
Credit History Information
- How Much You Owe to Lenders
- Late Payments
- Length of Credit History (longer = better)
- Financial Associates (those who have a joint bank account or mortgage with)
You payment history is probably the largest factor determining the health of your credit score. How responsible you’ve been with payments in the past is viewed as a good indication of how you will pay back future debt obligations. It doesn’t matter why you’ve had a late payment. Whether you didn’t have the money at the time or it just innocently slipped your mind, a late payment will usually cause your credit score to go down. The later your payment is, the larger the downward adjustment to your score. Even a late payment on a small amount can impact your history.
How Much You Owe
Another big component of your credit score is the amount of your outstanding debt. How much do you owe to lenders already? Potential lenders worry that the more you owe, especially in unsecured debt like loans or credit cards, the more difficulty you might have making your monthly payments and eventually paying these balances back.
Therefore, the credit agencies don’t look at your outstanding debt in isolation. They also consider your debt burden along with your payment history, to get the best idea of your ability and willingness to pack back your debts. For instance, a financially stable and well-off person may have a large mortgage for which they have a spotless payment history. Additional credit, in this case, may be easily managed, and therefore a low risk for lenders.
Credit utilization is the amount you have actually borrowed compared to your credit limit. Generally speaking, the lower your credit utilization the better. For example, consider a credit card with a £1,000 credit limit. If you owe £300 on this card, your credit utilization is 30% (£300/£1,000).
High credit utilization can be perceived as risky. If you have used up your credit limit on loans and credit cards (100% utilization) then you are maxed out in terms of what the lenders think you are capable of handling. A subsequent change in financial situation (e.g., you are made redundant) could really leave you in a pickle and without available credit when you really need it.
While you sometimes hear advice to cancel credit cards that you don’t use much, this may not be the best advice for the health of your credit score—but it all depends on your individual financial situation. For example let's say you have two credit cards, each with a £1,000 credit limit. One card has a balance of £500 and the other is generally unused. Your credit utilisation is 25% (£500/£2,000).
If you cancel the card you don't use, you now have half the credit available to you so your credit utilization doubles to 50% (£500/£1,000). This is likely to have an adverse affect on your credit score. Take this into consideration when deciding whether to keep or cancel an underused card.
Length of Credit History
A longer credit history provides a better picture of your financial behaviour to potential lenders and is why those without a credit card should think about applying for one. The sooner you start showing responsible payment of your debts, the more this component will positively affect your credit score. For this reason, if you do plan to cancel an account it's generally better to close a newer account than an older account. Showing a long history with even one account can positively affect your score, so think about keeping an older account even if it is underused.
Each formal credit application you make will show on your credit report for around one year. Too many off these marks can reduce your credit score and scare off potential lenders, as too many credit applications in a short period of time may be a sign you are struggling financially and in desperate need of more credit.
Luckily, not all credit checks adversely affect your score. Only a “hard search” leaves behind a footprint for other creditors to see. A hard search provides full access to your complete credit report and will occur when you apply for a credit card, loan, or mortgage. Potential lenders need access to your full report in order to make an informed decision regarding your credit application.
To avoid leaving a mark on your credit record, some lenders will use a “soft search” to indicate whether or not you will be accepted. This soft search is performed before the formal application process and does not negatively impact your credit score. (You can see these “soft searches” when you check your own credit report, but other lenders cannot.) Some credit card companies offer to perform a soft search before you formally apply to a card. These soft searches are embedded in an “eligibility checker” on their site. Eligibility checks using a soft search will generally give an indication, not a guarantee, or your application success. Soft searches are less robust, giving a general picture of your financial health, and may also be used by a prospective employer, for instance.
How Long do Marks Stay on Your Credit History?
Just because you faced financial difficulties in the past, doesn’t necessarily mean you can’t be a responsible borrower now. So how long do marks stay on your credit record? The table below details the timelines under which various marks will slip off your credit history.
|How long does a credit check or mark affect your credit score?
|6 years from date the account was settled, written off or defaulted (whichever happened first)
|County court judgments (CCJ) or decree
|6 years from date of judgment/decree
|6 years from original registration date, if the bankruptcy is no longer current
|Individual voluntary arrangement (IVA)
|6 years from original registration date, if IVA no longer current
|Gone Away Information Network (GAIN)
|6 years from original registration date
|6 years from date of the order, even if paid in full.
|Credit Check or Application Searches
|Debt Collection Searches
Quotation searches will be visible to you for one year, but do not leave a mark on your credit record, since they did not involve an application for credit.
A financial associate is another person with whom you are financially linked, perhaps through a joint bank account, mortgage, or loan. It is not uncommon for a current or ex-spouse or partner to be a financial associate. Problems can arise for you when a financial associate of yours has a lot of debt, missed payments, or a CCJ on their record.
While your associate’s financial situation may not directly affect your credit score, lenders will see this information and it may affect your likelihood of being approved for credit. As long as your joint accounts are still open, you remain linked. Once any joint accounts are closed, you may request that the credit agencies place a notice of disassociation on your credit report. That way, you won’t be adversely affected by another’s credit problems in the future.
Confirmation of Who You Are
Being registered on the electoral roll can help your credit score, whether or not you intend to vote. In order to help prevent fraud and money laundering, the credit agencies need to confirm that you are who you claim to be, and that you live at the address on your application form. One way they validate this information quickly is by comparing it to information on the electoral roll. If your name is not currently on the electoral roll at your present address, you can contact your local authority and ask for a registration form. If you want to get started online, look here: (Register to vote. To register you need to be 18 years old and a British, other Commonwealth, Irish or European citizen. Every year, usually in the autumn, local authorities contact the homes in their domain to update the electoral roll. If you’ve lived in your home more than a year, you may be on the electoral roll already.
Information that is Not Used in Credit Scores
While it may seem that credit scoring uses an astonishing amount of personal data, there is some personal information that is NOT included in a credit score (although the lender may request data like salary and employer from the lender):
Information NOT Used to Determine your Credit Score
- Marital Status
- Criminal Record
- Where you live
- Who lives with you (unless you are financially associated)