What is a good credit score
Firstly, what is a credit score?

A credit score is how companies view you when applying for credit with them. They want to assess your reliability and creditworthiness.

It can be quite tricky to define a single ‘good credit score’. This is because there are 3 leading Credit Reference Agencies, all of whom will score you differently.

These companies are:

  • Experian- score out of 999
  • Equifax- score out of 700
  • Transunion (formerly Callcredit)- score out of 710

In addition to the differing ways of scoring, your borrowing history will have an effect. You may feel you have an impeccable account since you have never had debt and therefore you owe nothing to anyone. But, this can work against you because the lenders have nothing to tell them you are reliable and never miss payments etc. In contrast, having borrowed sensibly and then repaid consistently shows that you are reliable and likely to repay a debt. Depending on what a creditor is looking for, individual records on your credit score report may look favourable to one company yet detrimental to another.

What affects my score?

Many factors can affect your credit score, both positively and negatively.

The occasional application for credit won’t be too harmful. Still, if numerous applications are made in a short time frame, this will work against you and leave a mark on your file. Rejected applications will also harm your credit score.

You should use no more than 50% of your credit limit, or less if possible. Lenders don’t like to see you maxed out as they think you may be a risk.

Not being on the electoral roll can have a negative effect too. Being on this register can verify who you are and where you live, and how long for. At the same time, this can make you look more stable and settled.

If the accounts on your credit file are all new, this could also lower the score. Older, well-managed accounts are beneficial. Lenders like to see that you’ve repaid credit back over the years, it shows a level of trust.

Missing payments or not paying debt at all will also have an adverse effect. Defaulting on a debt carries a more substantial penalty than missing one or two payments.

Any public records, such as a CCJ, IVA or bankruptcy, puts you at a very high risk of not being offered credit. Lenders will see you have gone back on a financial agreement in the past and are far less likely to lend.

Not having any credit history, as mentioned earlier, can also be detrimental. Creditors cannot see if you are adept at repaying a debt or not.

How do I improve my score?

Looking to improve your credit score is a sensible move, and there are a few things you can do.

  • Check that all payments are up to date.
  • Are you well within your credit card limits?
  • Only borrow what you can afford to repay.
  • Close down any dormant accounts, but bear in mind that a long-standing yet well-managed account looks better than none at all.
  • Consistently make repayments on time. Consider setting up Direct Debits to ensure this.
  • Monitor your report regularly so that there are no mistakes on your report and be aware of fraudulent activity.
  • If you have financial ties to an ex-partner, their credit may be linked to yours. A ‘notice of dissociation’ can be issued to the leading 3 Credit Reference Agencies.

By improving your credit report, you will find that you will get better loan offers and lower APR’s. You will be viewed more as a trustworthy consumer. The high score indicates that you can manage your credit sensibly and make repayments on time.

Improving your score won’t happen overnight. The reports are updated monthly, but it frequently takes longer than that. As part of your Notty Account , you will receive offers that may be suitable for your credit score, including payday loans and unsecured loans from £1,000-£25,000.