What is a good credit score?
Your credit score, or credit rating, is something that you’ll hear about a lot when it comes to finance products. It’s a literal score, or rating, that gives an indication of how companies are likely to view you when you apply for credit from them.
That, in turn, will greatly affect your chances of obtaining finance on the most competitive possible terms. After all, companies are always likelier to lend to people who have a track record of repaying money they owe and handling their funds responsibly.
Credit reference agencies (CRAs) each calculate their own credit score for you, based on your past financial behaviour and circumstances. That’s likely to include such factors as how much you owe, how frequently you apply for credit, and whether you consistently make repayments on time.
So, how can I check my credit score?
Not only can you check your credit rating with the leading CRAs, but you are legally entitled to do so for free. You can access your credit report via the websites of the relevant CRAs, or by requesting a written copy.
If you haven’t checked your credit score before or for a while, it might be a good idea to ask for it from multiple CRAs at the same time – particularly the three main ones in the UK, Experian, Equifax and TransUnion.
How does the definition of a ‘good’ credit score vary across CRAs?
The top credit reference agencies – also sometimes known as credit rating agencies – mostly use five categories for credit scores: excellent, good, fair, poor and very poor.
It’s important to appreciate that while each CRA holds a different file on you and calculates your credit score independently, they all base this score on your financial history. So if one agency regards you as having a ‘good’ credit score, the others probably will, too.
The other key thing to note is that CRAs differ in the numerical scales they use. Experian’s credit scores, for instance, range from 0 to 999, while TransUnion’s credit scores only go up to 710, and the highest possible Equifax credit rating is 700.
Experian is the UK’s biggest CRA, so let’s look at them first. According to their scale, a rating of 721 to 880 is considered ‘fair’. A rating of between 881 and 960 is ‘good’, and if your score with Experian is 961 or more, well done – you have an ‘excellent’ credit rating.
Moving onto TransUnion, which used to be known as Callcredit and is the second largest credit reference agency in the UK, a credit score of 566 to 603 is ‘fair’, and if it’s between 604 and 627, it’s regarded as ‘good’. That means an ‘excellent’ credit rating with TransUnion is 628 or above.
Finally, if your Equifax credit score is anything from 380 to 419, it’ll be considered ‘fair’. To move up to ‘good’, it’ll need to be 420 to 465, which means a rating of 466 or more is regarded as ‘excellent’.
The better your credit score, the better your chances
All of the above is important because it can make a big difference to not only your chances of being approved for credit in the first place, but also the competitiveness of the deals you are offered.
Whether you’re applying for a credit card, loan, mortgage or car finance, having a ‘good’ or – even better – ‘excellent’ credit score will strengthen your chances of getting the financial product you want, on the terms you desire.
There are many ways to help improve your credit score, ranging from registering on the electoral roll at your current address, right through to simply making your credit payments on time every month.
But if you are looking to fund a new vehicle and your credit score isn’t as good as you’d like, all is not necessarily lost. Apply for car finance today via CarFinanceGenie, and we’ll call upon our extensive panel of lenders to help match you with the deal that best suits your circumstances and needs.