Confused about what your credit score means? Here's the deal

By Natasha Culzac

How good is a credit score of 14? Or one of 3748? What does it all mean? We explain what the deal is with credit scores.

So you’ve been credit scored, huh? Most likely the score you’re referring to has been given to you by a credit reference agency (think Equifax or Experian). These are private companies whose job it is to keep tabs on you and your financial CV.

But it’s not the number that banks or other lenders give you. Their credit scoring is done in secret and you won’t be able to find it out. Instead, they use the information from credit reference agencies and couple it with their own data to score you and ultimately decide whether to approve you. Curious about what is a good credit score? Read this article here.

The score you get from credit reference firms just gives you a rough estimate of your creditworthiness and is not definitive. In fact, you’ll get different scores depending on who you’ve signed up with - partly this is to do with each agency potentially holding different information for you, but mostly this is because they have different spectrums:  Equifax will give you a score out of 600, while Experian gives you a score out of 999 and CallCredit a score out of five. With Experian, a score of less than 560 means you have a ‘very poor’ record and that you’ll most likely be rejected. ‘Good’ is 881-960 and ‘Excellent’ anything above that.

These guys compile your financial backstory; they look at how much debt you’ve currently got, how many bill payments you’ve missed etc and then they calculate a score for you.

They’re good for credit scoring guidance but they can be a bit pricey. Or there’s a range of providers that are new and completely free. With all of them you’ll be able to see any black marks against you, what you need to do in order to look more financially attractive and you’ll be able to spot any inaccuracies (which you’ll need to fix).

But what about the score a bank gives me?

Sadly, you’ll never know this number. It’s confidential, though a bank will be able to give you the main reason for rejecting your credit application.

Bear in mind that whatever your score is, it is not shared - as in, not every lender will see you in the same way. And each will have their own score for you.

Why’s that?

Because lenders don’t assess risk in the same ways. They have different scoring systems and where one may see you as a liability for a credit card and give you a low score, another may be sticking the card in an envelope and be licking the postage stamp before you can say ‘shopping binge’.

It also depends on what you’re after: you might be seen a massive risk when it comes to a mortgage, but not so much when it comes to buying a sofa on shop finance.

What affects my score?

Lenders will check your credit report to see what skeletons you have in your closet or, preferably, be delighted by your glistening, blemish free history.

Things in your report that can negatively affect your score include: defaulting on debts; too much or too little debt; maxed-out credit cards; multiple recent credit applications; CCJs (that haven’t been paid off within a month); and bankruptcies.

Things that can positively affect it include: being registered to vote; bills paid on time; and settled credit.

Points are awarded for each bit of relevant information. These are added together to make your score and once you pass a certain threshold, the likelihood of you being approved for the credit is higher.

However, it’s worth knowing that even if you pass this threshold and even if you get a high score, you can still be declined. Lenders may reject you if they feel the credit is unaffordable with your current income, or if you’ve got too many lines of credit already open with them, or even if your application is incomplete. It's key to understand what really affects your score, here's a article to know more.

Top takeaway

The score that a credit reference agency gives you, is not the score that a lender will see, so take it with a pinch of salt. It’s there for guidance only, so that you can have some sort of understanding of how creditworthy you are. Use this score to help you improve your report, but ultimately a lender will create their own private score for you anyway, which you’ll never see. Another thing to note, is that credit checks come in different styles - they can be hard or soft. Find out how they affect your credit score.


By Natasha Culzac

Thanks to a journalistic career history and a childhood at Sylvia Young Theatre School, Natasha has her fingers in a few professional pies, doing her best impression of a model and actor as well as personal finance writer. Outside of work she compulsively watches BBC period dramas and constantly lies to herself that this year will be the year she learns French, once and for all.

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