- Credit Score
You know by now that your credit score matters. In fact, if you're going to be applying for any form of credit, your credit rating more than just matters. With credit reference agencies (CRAs) collecting and holding information on how you manage your accounts, every action you take can affect your credit report and have a knock-on effect on your credit score.
Being able to check your credit score and review the information that CRAs are holding on you, do you know what you're looking for? Do you know what credit rating is good? Do you know which credit score is the best? No? Well, let us try and explain.
First things first about your credit score
The first thing to explain before we look at what credit score is good is that your credit file is going to vary between the 3 CRAs. This isn't a problem and is perfectly normal, but it is something to be aware of.
The reason your credit score can differ between Experian, Equifax, and TransUnion is because not every lender reports to every CRA. It is possible that you have a loan with one provider, and they will report to Equifax. You may have a credit card, and the card issuer reports to Experian. Perhaps you have a mortgage, and your mortgage provider reports to TransUnion. Some lenders may report to more than one CRA, and some may report to all 3.
To confuse things further, even where a lender reports to all 3 CRAs, and even if all of your lenders did, you still wouldn't get the same credit score. Why? Because each CRA uses a different range of scores, where one can give a maximum score of 999, and another only goes as high as 700.
Who would have thought that a 3 digit number could be so confusing? Ready for some clarity? Then read on.
The maths behind a good credit score
As we have seen, each of the 3 CRAs has a different range of numbers that they use to assign you your credit rating. Given the broad range involved and the fact that different lenders report to different CRAs, you are highly unlikely to see the same rating at each of these. Before we look at what credit score is good, let's have a look at the scales that each CRA has:
Experian credit ratings
This CRA rates you from 0 all the way up to 999. This is how they break down their credit scores:
- 0-560 - Very poor
- 561-720 - Poor
- 721-880 - Fair
- 881-960 - Good
- 961-999 - Excellent
Equifax credit ratings
With Equifax, the highest credit score you can be given is 700, and this is how they rate you:
- 0-438 - Poor
- 439-530 - Fair
- 531-670 - Good
- 671-810 - Very good
- 811-1000 - Excellent
TransUnion credit ratings
The third of the credit reference agencies give the highest credit rating as 710. This is how they record their scores:
- 0-550 - Very poor
- 551-565 - Poor
- 566-603 - Fair
- 604-627 - Good
- 628-710 - Excellent
So as you can see, simply quoting a number as a credit rating isn't that straightforward. If I were to tell you that my credit score was 700, you could well think that my credit report was in shipshape. If I was telling you my credit rating was from TransUnion or Equifax, then you would be right. If I were then to tell you that my credit rating was from Experian, your opinion on the state of my credit report would be somewhat different!
So how does any of this help to get you a good credit score?
Having promised some clarity on what credit score is good, perhaps you're feeling more confused than ever? If so, all you really need to take away from this is that as long as you are aware of the ranges each CRA uses, then you can determine if your credit rating is good or whether it needs some work.
Rather than just knowing what credit score you have with one CRA, it is worth knowing what score all 3 of them give you. It is also worth knowing what your credit report contains with them all. That way, you can spot any inaccuracies and have them put right.
Making sure that you have your credit rating from all 3 agencies now means that you can review these scores on a regular basis and make sure that they are either remaining strong or moving in the right direction.
It's all about what credit score is good for you
What credit score is good for you really depends on what you want to use credit for. If your credit rating sees you in the 'very poor' range you may find it very hard to get a mortgage or a credit card. If all you are seeking is a mobile phone contract, it is possible that being in this range will do.
What matters most is understanding how your credit score is worked out, how to improve it, and what to do if it starts to dip. A credit rating isn't some form of black magic that only the few can understand; it is something that is very much in your control once you understand it. Checking it regularly means that you can take action as soon as you need to if it starts to drop, and also means that you can apply for credit with confidence. It's also better to start building credit before you need to take credit. This is because your credit file takes time to grow and the best results will only show after about 12 months. The good news is that with Wollit you can start building your credit history, the single most important factor affecting your credit score, with all 3 major UK credit reference agencies.
Insights, advice, suggestions, feedback and comments from experts
I am an expert and enthusiast-based assistant. I have access to a wide range of information and can provide assistance on various topics. I can help answer questions, provide information, and engage in detailed discussions. If you have any questions or need assistance, feel free to ask!
Now, let's dive into the concepts mentioned in the article about credit scores.
Credit Score
A credit score is a numerical representation of an individual's creditworthiness. It is used by lenders to assess the risk of lending money to a borrower. The higher the credit score, the more likely the borrower is to repay their debts on time. Conversely, a lower credit score indicates a higher risk of default.
Credit Reference Agencies (CRAs)
Credit reference agencies, also known as credit bureaus, are companies that collect and maintain information about individuals' credit history. In the UK, the three main CRAs are Experian, Equifax, and TransUnion. These agencies gather data from various sources, such as lenders, and use it to generate credit reports and calculate credit scores.
Variations in Credit Scores
Credit scores can vary between different credit reference agencies. This is because not all lenders report to every CRA. For example, one lender may report to Equifax, while another may report to Experian. Additionally, each CRA may use a different range of scores. For instance, Experian uses a range of 0 to 999, while Equifax uses a range of 0 to 700, and TransUnion uses a range of 0 to 710.
Credit Rating Scales
Each credit reference agency has its own credit rating scale. Here are the credit rating scales used by the three main CRAs in the UK:
-
Experian:
- 0-560: Very poor
- 561-720: Poor
- 721-880: Fair
- 881-960: Good
- 961-999: Excellent
-
Equifax:
- 0-438: Poor
- 439-530: Fair
- 531-670: Good
- 671-810: Very good
- 811-1000: Excellent
-
TransUnion:
- 0-550: Very poor
- 551-565: Poor
- 566-603: Fair
- 604-627: Good
- 628-710: Excellent
It's important to note that a specific credit score may have different implications depending on the credit reference agency. For example, a credit score of 700 may be considered excellent by Equifax but only fair by Experian.
Importance of Credit Score
Your credit score plays a crucial role when applying for credit. Lenders use it to assess your creditworthiness and determine whether to approve your application. A good credit score increases your chances of getting approved for loans, credit cards, mortgages, and other forms of credit. It can also help you secure better interest rates and terms.
Monitoring and Improving Credit Score
To maintain a good credit score, it's important to regularly monitor your credit report from all three credit reference agencies. This allows you to identify any inaccuracies or potential issues and take appropriate action. You can request a free copy of your credit report from each CRA once a year.
To improve your credit score, focus on maintaining a positive credit history. This includes paying bills on time, keeping credit card balances low, and avoiding excessive debt. Building a strong credit history takes time, so it's beneficial to start early and be consistent in your financial habits.
Remember, understanding your credit score and taking steps to improve it can help you achieve your financial goals and access better credit opportunities.
I hope this information helps! If you have any further questions, feel free to ask.
