How To Understand The Credit Score Range

One of the biggest myths about credit scores in the UK is that your credit score is universal, and it’s this single score that follows you around all your financial dealings. But, there’s no such thing as a universal credit score! Any lender you apply to will have their own, unique scoring system and credit score range, because they all look for different things when deciding which customers they can accept, and which they can’t. Lenders don’t generally share how they scored you when they tell you if you’ve been accepted or not, as their scoring models are their secret sauce, if you will. Most of us access our credit scores through credit reference agencies and apps that are powered by them. But, how do you get your head around what you see? And of the credit score range, what makes a good score? Let’s find out.

What is my credit score?

Your credit score is a way of summing up your credit history as a number. It’s calculated by taking in and analysing all the records of how you’ve managed credit in the past. Then, it gives you back a number that represents how good your management of credit has been, and based on this, what kind of risk you pose to a lender. The higher your credit score, the better you’ve managed your use of credit, and the less risk you present to a new lender.

A low score is usually caused by problems you might have had in the past, for example if you fell behind on paying back a loan, and means you represent a higher risk of not paying back what you borrow from a new lender. But, you can also have a low score if you’ve never used credit before, simply because you have no past behaviour that can help a lender decide if you’re likely to pay them back or not.

What is a good credit score?

What a good credit score is really depends on who you ask! At CredAbility a score of 420 or higher is considered “Good”, and a score over 466 is “Excellent”. Your CredAbility credit report is powered by data from Equifax, who are a large credit reference agency, and we use their scoring system. But, if you use another credit reference agency, like Experian or TransUnion, you’ll find that they use a different system. What number makes for a good credit score with them is different, too. With Experian, a score over 881 is good, and with TransUnion you’ll need a rating of 4 or 5.

What is the credit score range?

The credit score range is different depending on which credit reference agency’s data you’re viewing. At CredAbility and with Equifax, your score is out of 700. But, with Experian, it’s out of 999. If your credit report is powered by TransUnion, your credit score can be either a number, or a rating from 1-5. What all the different agencies’ scoring systems have in common, though, is that they split scores into brackets that go from “very poor” to “excellent”. So, if your score is classified as “good” with one agency, then you should find that you have a score that falls into the “good” bracket with the others, too. We’ve put together this table to help you see how each agency’s scores compare to each other:

Why is it important to have a good credit score?

Your credit score indicates to lenders you apply to what risk there is of you not paying them back. This risk is calculated based on your past management of credit. A high credit score shows you’ve been a reliable borrower in the past, so the chances of you being unreliable now are pretty slim. A good credit score makes lenders more likely to approve you. They may also be willing to lend you a higher amount of money, or at a cheaper interest rate.

Having a good credit score is necessary for a lot of things. If you ever want to buy a house and use a mortgage to do it, then you’ll need a good credit score in order to be accepted and get the best interest rates. Or, if you want a new credit card, then you’ll need a good credit score to be able to access the highest credit limits at the cheapest interest rates. It may also mean you’re eligible for better deals on balance transfers and new purchases. A good credit score will also help you to access car finance deals like PCP or hire purchase arrangements, if you want to use them to buy a car.

If you don’t have a good credit score, then this doesn’t mean that you can’t get accepted for credit. But, you may find that you have a smaller number of lenders to choose from, and you’re not able to borrow a large amount of money. You may also find that borrowing money is more expensive for you, as a low credit score can mean you’re offered higher interest rates.

Whatever your credit score, before you apply for credit, it’s wise to check your eligibility – if the lender offers this as part of their service. This way, you can find out how likely you are to be approved before you go through with an application.