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Have you ever wondered whether you have a “good” credit rating? We look at what the three major reference agencies believe to be excellent scores – and what you can do to enhance yours. Whether you are a first-time homebuyer seeking to purchase a home or applying for a credit card or loan, let us assist in clearing up some of the ambiguity around what makes a good credit score in UK.
What exactly is a credit score?
It’s a number assigned to everyone over 18 in the United Kingdom to reflect their creditworthiness. Each lender calculates their credit scores differently, but they all utilise data from the three major Credit Reference Agencies (CRAs): Experian, Equifax, and TransUnion. Various subscription services will provide a person’s credit score, sometimes for free and sometimes for a cost.
When are you going to acquire one?
Anyone in the UK above 18 may apply for a loan, mortgage, credit card, or any other credit arrangement. Still, anyone under that age will have their application rejected. It is not because it is unlawful; instead, the agreement between a lender and someone under 18 may legally enforce no credit.
Lenders and credit reporting agencies (CRAs) will begin to add points to your score once you reach the age of 18.
What exactly is a good credit score?
A strong credit score implies that your credit history may make you an appealing client to lenders, increasing your chances of getting approved for loans.
Why is having a high or decent credit score important?
A good credit score offers two benefits. One advantage is that you are more likely to be approved for a mortgage and less likely to be denied a credit card or mobile phone contract. The second advantage is that if someone is approved for a loan, the lower interest rate.
What is a decent credit score in the United Kingdom?
Although the rating algorithms of the three major credit reference agencies vary, below is an outline of what is considered an “excellent” score:
- A respectable credit score with Experian is between 881 and 960
- A decent Equifax credit score is between 420 and 465
- A credit score of 4 is considered a “good credit rating and implies that lenders may perceive you as low risk” by TransUnion (previously Callcredit)
What if my credit score isn’t considered “good”?
It’s crucial to realise that even if your credit score isn’t “excellent,” you may still have credit choices. Over time, it is also feasible to enhance your credit score by practising responsible borrowing habits such as paying your payments on time each month. Continue reading to learn how to boost your credit score.
The three major credit reference organisations qualify their rating methodology as follows:
Experian
- Experian will assign a credit score between 0 and 999 depending on the information they have about your financial behaviour
- ‘Excellent’ is defined as 961-999
- According to their website, an ‘excellent’ score is between 881 and 960
- ‘Fair’ means between 721 and 880. You may be authorised for credit at reasonable interest rates, but you may not be granted a significant amount
- ‘Poor’ is a number between 561 and 720. Credit with higher interest rates may accept for you
- The scale for very poor’ is 0 to 560. You are more likely to be denied credit if you have this rating
Equifax
- Equifax credit ratings vary from 0 to 700
- ‘Excellent’ ranges from 466 to 700
- ‘Good’ is between 420 and 465
- ‘Fair’ is a value between 380 and 419
- ‘Poor’ ranges from 280 to 379
- ‘Very poor’ is less than 279
TransUnion
- TransUnion assigns a score to you ranging from 0 to 710. They also have a credit rating system based on your financial history that goes from 1 to 5. The best rating is 5, which corresponds to 628-710
- According to this organisation, a credit score of 604-627 (credit rating of 4) is a “good credit rating and implies that lenders may see you as low risk,” according to this organisation
- A credit rating of 566-603 (credit score 3) is neither excellent nor terrible. You may be charged higher interest rates if you are accepted for credit
- A credit score of 551–565 (credit rating 2) indicates that you are more likely to be turned down by creditors and charged higher loan rates
- A credit score of 0–550 (credit rating 1) is the lowest rating, and you may have difficulty obtaining credit. You might face more excellent interest rates than the other groups
Regardless of whose agency you choose, the better your score is, the less dangerous you look to lenders. As a result, your chances of getting authorised for credit are increased. The finest offers with the lowest interest rates are often reserved for individuals with the most outstanding scores (however, this will also rely on the lender’s standards).
What is the average score in the United Kingdom?
According to Experian, the national average is 759 out of 999. Equifax scored 380 out of 700, about 450 out of 1000, under the new rating system.
Conclusion
A credit score is a three-digit figure computed from information on a credit report that typically varies from 300 to 850. On the FICO® Score scale, a credit score between 670 and 739 is good, while a score between 661 and 780 on the VantageScore® scale is good. If credit scores are unfamiliar to you, this video explaining what a credit score is and the difference between a credit score and a credit history may be an excellent place to start.
Experian, Equifax, and TransUnion are the three primary Credit Reference Agencies (CRAs) in the UK, and each has its credit report on you. Another reason your score may change across your three credit reports because each credit reference organisation may have gathered different information about you. Read above guide on good credit score in UK to know more.
