Your credit score is one of your most prized assets because, without it, you won’t be able to acquire credit when you need it. If you want to get on the property ladder, build a property empire, buy a car, get a personal loan, your credit score is your leverage. As a result, it is crucial that you understand your credit score and how it can work for and against you.
What is your credit score?
Your credit score is your financial persona. It’s a record of your financial habits that determines if you get the mortgage on that house you have your eye on. A data set the banks and other lenders use to establish if you are creditworthy and therefore a person they should lend money to.
It’s important to acknowledge that you have a credit score and a credit report. Your credit score is a number out of another number and depends on the credit referencing agency being used to rate you. The information held on your credit report includes your payment history, your account management, credit facilities and more. How you’ve conducted your finances ultimately determines a positive or negative score.
Your credit report is the dress or shirt you’d wear on a first date with the man or woman of your dreams, it’s your freshly revised CV for that all-important job interview.
Why improve your credit score?
When you understand your credit score, you have a slight upper hand when you apply for credit. You will have an understanding of what the lenders are looking for when assessing your credit score to lend to you. It’s usually based on:
- Information from your credit report.
- Your application details.
- Data they already hold on you, if you’ve been their customer before.
A poor credit score can, at the very worse prevent you from getting credit and make credit expensive to get if you do get accepted. This is because the bank or lender will view you as a high-risk client meaning interest rates will likely be higher and any balance transfers on things like credit cards will likely be shorter.
On the contrary, if you have good credit, you are more likely to be offered better credit card offers (such as longer balance transfers and purchase deals), low-interest rate loans, and even 0% finance agreements.
Credit Reference Agencies
There are three Credit Reference Agencies in the UK; namely Experian, Equifax and Transunion (formerly CallCredit).
It’s worth noting that each of these agencies may hold slightly different variations of your credit report. On the surface, this isn’t a big problem, however not all the lenders use the same agencies when assessing a credit application. Therefore, it’s important that you know which agencies a prospective lender uses before applying for credit.
Where does the data on my credit report come from?
There are numerous sources the Credit Reference Agencies pool information from. Here are a handful
- Electoral Roll – This gives lenders the ability to understand where you’ve been in past. If you’re financing a car, it will give the lender some comfort in knowing that you’re not a nomad and you’re registered at a residence.
- Court Records – Missed payments and defaults that end up with a County Court Judgement are all captured on your credit file.
- Account Data – How you conduct your current accounts, credit cards, loans, overdrafts, car finance agreements and more forms part your credit files.
- Utility Providers – Your gas, electric and mobile phone contracts are reported to the Credit Reference Agencies.
What does your credit score mean?
Your credit score with TransUnion.
TransUnion organises their credit score range using a rating between one and five, one being the worst and five being the best. Fortunately, we’ve solved the mystery about how TransUnion’s credit score range pairs up with their ratings.
Score Band Rating
0–550 Very Poor 1
551–565 Poor 2
566–603 Fair 3
604–627 Good 4
628–710 Excellent 5
Your credit score with Experian.
Experian provides credit scores out of 999 and defines a good credit score as anything that’s 881 or above. You can see all their classifications below.
0 – 560 Very Poor
561 – 720 Poor
721 – 880 Fair
881 – 960 Good
961 – 999 Excellent
Your credit score with Equifax?
Equifax provides credit scores out of 700 and defines a good credit score as anything that’s 420 or above. You can see all their classifications below.
0 – 279 Very Poor
280 – 379 Poor
380 – 419 Fair
420 – 465 Good
466 – 700 Excellent
How to access your credit report.
There are numerous ways you can access your credit file. Many of them are free and available via apps on your smartphone. They will help understand your credit score better. I have linked a few below.
- ClearScore provides free Equifax (the second biggest credit agency) scores and reports, updated once a month (note, Equifax and Clearscore are not the same company). It’s not part of a free trial – it gives you your credit report free for life, but will also offer you credit cards and loans that you’ve ‘matched’ with. It gets a commission on any you take out, though you’re under no obligation to do so.
Pros: You can get your Equifax report free every month, not just for 30 days like the free trial below.
Cons: You’re sometimes directed to certain products on the site, though that doesn’t mean they’re right for you. Always research the type of product you need and what’s on offer.
How to cancel: Go to your ‘My Account’ page, and click on ‘Delete My Account’, you’ll be sent an email to confirm your cancellation request has been processed.
- MSE Credit Club offers full access to your Experian Credit Report for free anytime. You’ll be able to see details of all credit accounts you have, searches made against your file, financial associations and linked addresses, plus much more. And you won’t ever have to pay for it.
Pros: It’s completely free for life, not just for 30 days.
Cons: It may not be as comprehensive as the others. MSE Credit Club offer certain products on the site but that doesn’t mean they’re right for you. Always research the type of product you need and what’s on offer.
How to cancel: It’s easy. Just log in to your account, go to ‘Settings’ then click the big red ‘Delete My Account’ button.
- Credit Karma grant access to your TransUnion credit report though it’s not as widely used by lenders as the other two agencies above. If you use Credit Karma, it will offer you credit cards and loans that you qualify for, though you don’t have to apply for anything to continue using the free report service.
Pros: It’s completely free for life, not just for 30 days.
Cons: It may not be as comprehensive as the others. It also recommends certain products on the site, though that doesn’t mean they’re right for you. Always research the type of product you need and what’s on offer.
How to cancel: Email email@example.com and tell it you wish to cancel the service and de-register from Credit Karma.
Let me know what you’ve found useful in tips and how this has helped you understand your credit score better.