When did you last check your credit score?
Despite now being free, less than half (45%) of British adults have ever taken the time to find out their credit score. So I guess there’s a pretty good chance you answered ‘never’ to the title question, which I think is a shame. Let me explain what your credit score is and why it’s important. And while we’re on the subject, I’ll try to set the record straight on some popular credit untruths too.
What is a credit score?
Your credit score is an assessment of your credit report (aka credit history), which is your recent track record managing a wide variety of credit accounts such as loans, credit cards, mortgages, mobile phone contracts, car finance, current account and even some regular household bills such as energy, water and broadband.
Ask a lender for credit and it’ll get your permission to check your credit report to help it predict how you’ll behave in the future. There are three agencies in the UK that compile credit reports on people my employer Experian, Equifax and Callcredit. Your report at each agency can differ as we don’t all work with the same credit providers.
How is the credit score used?
To help lenders process large volumes of applications quickly and fairly your credit report is usually turned into a credit score. This indicates the probability you’ll miss future payments based on your credit track record. The higher the score the lower the risk. You can ask each agency for a copy of your report and for a guide credit score. It won’t be the same score a lender uses but will give you a decent idea where you stand.
The Experian Credit Score is calculated on a scale of 0-999. A score of 961 or higher is classed as excellent and around 30% of Experian’s customers have an excellent score. As a result, they should be able to access cheap borrowing from a wide range of providers. On the other hand, a poor score can leave you struggling to be accepted for credit and, if you are successful, paying over the odds for the privilege.
Improving your credit score
So, it can certainly pay to take a little time to find out your score and, if it leaves room for improvement, to explore how you might be able to improve it.
The three agencies have lots of advice on their websites on building a great score and they can give your personal tips if you get in touch. Services like Experian CreditMatcher can also show you which credit products you’re likely to be accepted for based on your current credit score, removing a lot of the guesswork from applying for credit.
To help make sure your credit score is right on the money, let me sign off by leaving you with my five top tips on getting your credit score in good shape, plus the top credit score untruths.
Top tips for a tip top credit score
1 Build a positive track record – use some credit and don’t miss payments.
2 Don’t max out credit cards, ideally keeping balances below 50% of the limit. In fact, the lower the better.
3 Space out new credit applications to avoid looking needy.
4 Decouple your report from other people’s if they’re no longer linked to you (eg an ex-partner).
5 Register to vote – it helps ID checks and can give your credit score a boost.
Top five credit untruths
1 There’s a credit blacklist – nope, there isn’t one. Credit reports are factual and mostly positive.
2 Previous occupants affect your credit rating – not the case. Someone else’s credit history can only come into play if you’ve linked up (usually via joint credit with a partner).
3 Credit refusal damages your score – no it doesn’t and the outcome isn’t even shown on your report, just the fact that you applied. But do avoid multiple applications (see pt. 3 above).
4 Credit reference agencies decide who gets credit – not at all. We do help but only the lender can decide which customers to accept.
5 Checking your credit report (or your score) harms your credit score – absolutely not! You can do this as often as you like – so what are you waiting for?
About the author
James Jones is Experian’s Head of Consumer Affairs and leads the company’s public education programme, advising people on, for example, credit reports, credit ratings and identity fraud. James is frequently on TV and radio, and regularly answers people’s questions through both traditional media and online via the Experian website, Facebook and Twitter. He began his career at Experian in 1992 after graduating from Cambridge. He loves travel, sport and real ale, and regularly combines all three by following Nottingham Forest and Nottinghamshire County Cricket Club.