Do you know your credit score?

Do you know your credit score?

author: Bryony Pearce

By Bryony Pearce

From how it works and where you can find it, to the benefits of regularly checking it, we’ve taken a good look at all things credit scores.


To know your credit score, first and foremost, you’ll need to know what it actually is. So in a nutshell, your credit score is a type of tool that lenders use to gauge whether or not you’re likely to be a responsible borrower.

The higher your credit score, the more lenders are likely to accept your application for credit. Although a low score doesn’t necessarily mean lenders will say no, it’s likely to compromise certain aspects of the credit agreement, like how much you can borrow and the interest rate you’re charged.

How do credit scores work?

Each lender will have their own criteria and ways of working out whether you’re a responsible borrower. Because of this, there’s no such thing as a ‘universal credit score’ which, in some ways, could be beneficial to you.

Why, we hear you wonder? Because it means that just because one lender turns you down, not all of them necessarily will. In fact, some lenders specialise solely in lending to people with less-than-perfect credit histories.

As well as taking your credit report into account (we’ll go into more detail on this next), lenders may also take into consideration your application information and past dealings (if applicable) when calculating your credit score.

What’s in your credit report?

There are a number of components that make up your credit score, and these are:

Credit accounts: this includes everything from debit and credit cards to unpaid loans and utility debts. This shows lenders two things:

1)  How much credit you currently have access to

2)  What kind of borrower you are. How? Because for each line of credit within your credit report, they’ll be able to see whether or not you’ve made your repayments a) on time, and b) in full. Any defaults (i.e. a late, missed or partial payment) will remain on your credit report for six years.

Financial links: you can be financially linked to anyone – such as a family member, friend, spouse or dependent – because of joint credit accounts you may hold with them. Their details will appear on your report and will contribute to your overall score.

Public records: this could be anything from County Court Judgements (CCJs) and house repossessions to bankruptcies and individual voluntary arrangements (IVAs). As with credit defaults, these can stay on your credit report for up to six years.

Personal details: including your name, date of birth, current and previous addresses, whether or not you’re on the electoral register, and if you’ve ever committed any type of fraud.

How do you check your credit score?

There are three main credit reference agencies in the UK: Callcredit, Equifax and Experian, and you can check your credit report with each of these – either for a fee or for free.

However, as we mentioned earlier on, there’s no such thing as a universal credit score, so your result may well differ not only across each agency, but also from how lenders rate you too. That said, they are still a good indication of your overall credit health, and they may give you a good idea as to how lenders may view you.

Here’s how each of the core credit reference agencies break down their scoring system down:

 

CallCredit

Equifax

Experian

Very poor

0 to 550

0 to 278

0 to 560

Poor

551 to 565

279 to 366

561 to 720

Fair

566 to 603

367 to 419

721 to 880

Good

604 to 627

420 to 466

882 to 960

Excellent

628 - 710

467 to 700

961 to 999

 

Why it’s important to check your credit score

There are lots of reasons why keeping on top of your credit score is important, like:

  • Refine your applications: having a rough idea of how lenders are likely to rate you as a borrower could help you to consider the types of credit cards, loans or mortgages you may wish to apply for.

  • Improve your score: if you’ve got a less-than-ideal credit score and you don’t know about it, it’s difficult to do anything about it. By regularly checking your credit score, you could see where you’re falling short, and take steps to improve those areas. Doing so may help to improve your credit score, which, in theory, may open up the door to more attractive lending options down the line.

  • Spot mistakes: mistakes on your file could damage your chances of being accepted for credit. Casting an eye over all your information from time to time may help you to spot any errors and you could amend them before they hinder any potential credit applications.

  • Prevent identity fraud: the Home Office recommends that everyone regularly checks their credit score to protect against identity fraud. If you log on and spot any suspicious and/or unfamiliar activity, you’ll hopefully be able to nip any fraudulent activity in the bud by notifying relevant lenders and authorities.

 So, hopefully, this blog has brought you up to speed with all things credit scores and why checking yours could be really important to you.

And remember, don’t be disheartened if your score isn’t glowing green, there are ways you could do to improve your credit score and it doesn’t mean you’ve hit a dead end in your quest for credit.

Disclaimer: All information and links are correct at the time of publishing.

author: Bryony Pearce

By Bryony Pearce

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Do you know your credit score? Do you know your credit score?