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Your credit score is a very important number as it gives a snapshot of your credit profile and your ability to make payments. It shows creditors how likely you are to repay debt and it also has an impact on the type of interest rate you are offered when taking out a credit product.
Credit scores work differently for the various credit reporting agencies (Experian, TransUnion, and Equifax) so their scores will vary. However, a good credit score from Experian is between 810 and 960, while a good credit score from TransUnion is between 720 and 780.
The highest credit score you can get with Experian is 999 and with TransUnion, it’s 850 (using the new VantageScore 3.0 model). The highest credit score from Equifax is also 1,000.
Credit reporting agencies take various things into account when calculating your credit score, including your payment history, how much you borrow, and how many credit applications you make.
The average credit score in the U.K. can’t really be tied to a number as all three credit reporting agencies use different models to rate credit scores.
However, the average credit score in the U.K. falls within the ‘fair’ range across all three agencies.
Every credit reporting agency has its own credit scoring model, so it’s important to keep an eye on your credit scores from multiple agencies. They pull data from your credit report and give you a score based on multiple factors. Your rating can also fall into different categories, including:
Excellent
Good
Fair
Poor
Very poor
For example, in addition to a three-digit score, TransUnion also rates your credit score with a grading; an A score is a score in the range of 781 to 850, while a B rating is a score in the range of 720 to 780, and a C rating is a score in the range of 658 to 719.
If your credit score improves and ends up in the highest range with each credit reporting agency, you can expect better credit offers and favourable interest rates.
Your credit score is calculated from your credit report, which documents your financial history and how you manage your credit. If you have a good credit history - you pay your debt on time and in full - you will likely have a higher credit score.
If you have a poor credit score - like missed payments or a high credit utilisation rate - you will likely have a lower credit score. This is why it is important to make sure that you pay your accounts on time and in full, and that your personal information is up to date.
Here are some of the things that can negatively affect your credit score:
Late or missed payments
Defaulting on credit agreements
Insolvencies, bankruptcies, or County Court Judgements (CCJs)
Frequently using cash from your credit card
Not being registered on the electoral roll
Joint accounts with someone who has a bad credit record
Making too many applications for credit at the same time
Following good credit practices will help maintain and even improve your credit score.
Register on the electoral roll. Registering on the electoral roll with your current address helps to confirm your identity.
Pay on time. Pay your accounts on time and in full every month. This shows lenders that you are reliable and can handle your credit responsibly.
Reduce your credit utilisation. This means you should not use the maximum credit limit extended to you as it might show that you are dependent on credit.
If you have a credit limit of £4,000 for example, and you’ve used £2,000 then your credit utilisation is 50%. A lower percentage is better and good practice is to keep it between 25% and 30%.
This shows lenders that you are not relying on credit and that you can handle your debt responsibly. If you have a low credit score, reducing your credit utilisation can also help increase your score.
In terms of long-term credit goals, try to reduce your outstanding debt over time to improve your creditworthiness. You can also try to stay at the same address for a long time period as it shows stability.
Avoid things that can negatively influence your credit rating, such as missing payments, making too many credit applications in a short time period, and maximising your credit utilisation ratio. Also, keep in mind that outdated personal information can also hurt your credit profile.
It might seem a bit unfair but if you don’t have any credit history yet, it can also count against you if you want to borrow money. Lenders want to see that you manage credit responsibly and without a history, they can’t verify this.
One option is to use a specialist credit card that is aimed at people who need to build up their credit history. These are called credit builder cards and although they may have a higher interest rate, they can help you boost your credit profile.
Ask your bank if they offer interest-free overdrafts. Some banks offer this to new customers and it may be a good alternative to a credit card. These cards may have a lower credit limit than a credit card but they will typically also have lower interest rates.
Here are a few tips to keep maintain your good credit score:
Limit the number of credit applications you make. It may be tempting to apply for multiple credit products at a time, but it’s not a good idea as every inquiry shows up on your credit profile. The more you apply, the more inquiries will show up and this could hurt your score.
Close accounts you don’t use. If you have too much credit available it may look like you are deep in debt so be sure to close off accounts you don’t use anymore.
Maintain a good payment history. Keep up with payments to avoid any missed payments or default statuses being recorded on your credit profile.
Only apply for credit you can afford. If you end up with missed payments, judgements, or bankruptcy it will stay on your credit report for up to six years.
Keep in mind that your credit score can fluctuate at times as information is added or removed from your report. You can monitor your credit score on a weekly or monthly basis but it’s not necessary to always try and achieve the perfect score as this is not the only thing lenders look for when making a decision.
You can also opt into text reminders so that you are notified by credit agencies of any change in your credit score or personal details. It only takes a few minutes to register.
Seeing that there is no magic number that will guarantee you will be accepted for credit, each lender has its own criteria and you may get approved by some and rejected by others.
However, you should typically try to improve your credit score as much as possible. Doing so can help you get approved for credit products more easily and also get you better interest rates.
You never know when you may need credit. With a good credit score, you are not only more likely to get approved for credit products, but you may also receive a favourable interest rate.
Good credit scores help you get the best deal and get credit when you need it most. It also gives you more options and higher credit limits.
You may have a low credit score for many reasons. You may be new in the U.K. or not have a credit history yet as you’ve just turned 18. If you have a bad credit score or no score at all, you may need to accept that you won’t get the best deals at the moment and you may also have limited choices.
But you do have options to build up your credit. You can apply for a credit card for people with bad credit, open a bank account and set up auto-debits, and make sure that your personal details are up to date on your credit profile.
Monitor your profile regularly and be responsible when it comes to managing your finances, to help improve your credit score.
Yes. Some credit reporting agencies, like Experian, use numbers up to 999 so this would be a good credit rating as it is above 881 (the requirement to be classified as ‘good’).
