We have looked in the past at credit scores. Usually we examined how to improve them, what effects them and so on. But what we often pass over is the key question of what counts as a good credit score. So we decided to put that right and take a look.
The primary difficulty with credit scores is that there are several of them. In truth, there are three companies that provide scores, and they don’t all utilise the same financial data.
Another issue with credit scores is that they are calculated in a variety of methods. You can’t truly tell if a number is excellent or terrible without knowing more about it, such as the range from which it was taken. Some are from a group of roughly 999, while others are from a group of around 700.
And, to make matters even more complicated, the organisations to which you apply do not really use these scores! They have access to the data that goes into credit bureau scores, as well as any information you submit. They search for a variety of things based on the position you’re applying for.
So it’s clear that knowing what a good score is and if you’ll be accepted for whatever credit you’re seeking for isn’t always easy.
They recently changed the range from 1-700 to 1-1,000.
If you’re seeing the score out of 700 the range is as follows:
This company scores out of 710.
Although not all credit reference companies agree, ClearScore, which uses the old Equifax system, claims that the UK average credit score is 414 at the time of writing. This places it in the “Fair” band, although at the very top.
Experian provides a map that allows you to view scores by region (and age too if you want). The average credit score in London is 887, which is on the low end of the Good scale. It’s 823 for North Somerset, which is midway through Fair.
The most important thing to remember is that credit ratings aren’t always accurate. They’re a gauge of how excellent or poor your credit report is (I go into more detail about credit reports in this blog).
However, this isn’t the only factor that lenders consider. Extra information you supply, such as your salary, might either help or hurt your chances of being accepted. They won’t even see your score; instead, they’ll generate their own based on their own criteria, the information in your credit report, and any additional information they have. The number itself has little relevance unless you use it to track your progress when striving to improve it. When you watch it rise, you know you’re on the right track.
If it begins to fall, it may be a hint that you need to take action; however, it will always fall following a new application and will correct itself after a while.
Across the agencies “excellent” suggests you’ll probably get accepted for most types of credit and be offered the best rates and deals. But there’s no guarantee and you could still get rejected when you apply.
A “good” credit score indicates you will usually be accepted for credit, though you might not get the best deals.
An “average” or “fair” score means there is still a decent chance you’ll get accepted but you won’t get the best deals or rates. For example, you might get a lower credit limit or a shorter 0% period. It’s even more important to use soft checks, particularly on credit card applications, to find out who will accept you.
If your score is classed as “poor” or “needs work”. And it’s likely you’ll be seen as high risk to lend to therefore far less likely to be accepted when applying for credit.
Right at the bottom, being classed as “very poor” is a sign you will probably get rejected. This could be because you have some black marks on your credit report – such as bankruptcy – or maybe just a very limited credit history.