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Credit scores - facts and fiction

We all get told that we should be checking our credit scores regularly and we should get hold of our latest credit report. Heck, we even tell you to do it. But how do these reports really help you? To help you understand them better we take a look at credit scores and what they’re all about.

Credit score myth-busting

Firstly, let’s start by busting a couple of popular credit score myths:
  1. There’s no such thing as a credit blacklist
  2. There is no definitive credit score in the UK
  3. An official credit rating system doesn’t exist
Ok so that might not help you understand credit scores, but we’ve got your attention so keep reading and let us explain a bit more.

3 main agencies, 3 different scoring systems

There are 3 main credit reference agencies in the UK: Equifax, Experian and Callcredit, and all of them will give you a different number for your credit score. Callcredit will give you a score out of 710, Equifax a score up to 600 and Experian a score up to 999. So it’s easy to see how these scores can get more than a tad confusing.

Drumming up a credit score

So you’ve got one (or three) of these scores but are wondering how exactly they came up with your score. Well basically each agency relies on the information they’ve kindly been sent by lenders, which they keep on file and update whenever a lender gets in touch. Herein lies one of the issues with the agencies’ credit scores – they’re basing it on incomplete info. Not all lenders will send your credit information to the agencies, or they may send to some of them but not all.

You're more than just a credit score

It’s important to know that a lender considers more than just your credit score(s) when they're deciding whether or not you're right for a loan or credit agreement. Lenders consider your application based on three main factors:
  1. Your application details. These are the usual suspects, e.g. name, address, date of birth, etc.
  2. Any history that you may already have with them from previous borrowing.
  3. The info contained in your credit file, which can differ from agency to agency - no single agency has the full picture.
Your credit score is therefore just an indicative guide to roughly how good or bad a risk you are, and a part of the lender’s overall decision-making. It’s also useful to know that just because one lender has said no, that doesn’t mean that all other lenders will say the same thing.

So, should I ignore the score?

No, not necessarily. After all, it’s based on fact (albeit potentially limited) and not just plucked out of thin air. Your credit score does give you a rough idea of your general credit profile and it’s useful to show you how good you look in the eyes of lenders, more or less. Also, it’s always worth checking your credit file now and then to make sure there are no mistakes on there. Any wrong information on your file can affect your ability to borrow. If you do notice a mistake then get in touch with the credit reference agency as soon as possible to get it corrected.

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