In the world of borrowing, higher credit scores tend to unlock more opportunities for credit at more favourable interest rates on products such as mortgages, loans or credit cards.
On the other hand, lower credit scores tend to be less successful with credit applications or charged higher rates.
Each credit reference agency has its own system for calculating credit ratings, so the average credit score in the UK varies between them. Read on to find out what this means for you and your credit score.
What is a credit score?
A credit score, or credit rating, is a three- or four-digit number that shows how reliable you are at borrowing money. It gives a snapshot of your credit history and how you have managed debt in the past.
Typically, a higher credit score increases your chances of being approved for new credit and for larger loans. That is because a high credit score suggests to lenders that you are a reliable borrower and can keep up with repayments.
And, the lower your credit score, the less likely you are to be accepted for certain products. That is because it might suggest to lenders that there is a risk you won’t repay what you borrow.
Credit scores are calculated using data from your credit report. Your credit report acts like a CV for your finances and includes details about your address history, credit history and public records, such as county court judgments.
The UK has three main credit reference agencies – Equifax, Experian and TransUnion – that collect this information to produce your credit report and credit score.
» MORE: Find how credit scores work and why they matter
What is the average credit score in the UK?
Each credit reference agency has developed its own rating system for credit scores, so it is hard to pinpoint a singular average credit score for the entire UK.
This is because different lenders share your data with different credit reference agencies. For example, some lenders only report to one or two agencies while others might share your information with all three.
Currently, Equifax provides a credit score from 0 to 1,000, while Experian scores from 0 to 999 and TransUnion scores from 0 to 710.
So don’t worry If your credit score looks a little different on each credit report. The main thing to focus on is the classification of your score and what it means for each agency.
Average credit scores will vary in different regions of the UK and according to your age group. Experian has a useful calculator where you can key in your age and region and find out its average credit score. But remember that average credit scores will fluctuate, depending on the credit scores of people who have signed up. For example, at the time of writing the average credit score for a 30-year-old living in Birmingham was 741.
What is a good credit score?
If you are thinking about buying a home and need a mortgage or want to get a new credit card, you may be wondering if there is a good score that makes lenders more likely to approve applications.
Since each credit reference agency has its own credit rating system there is not a universal ‘good credit score.’ So what is classed as a good credit score will vary between the different agencies.
For instance, with Equifax, a good credit score starts from 531, while for Experian it is 881 and with TransUnion, it is 604.
The table below shows the classifications of a good credit score at each credit reference agency.
|Excellent||811 to 1,000||961 to 999||628 to 710|
|Very good||671 to 810||-||-|
|Good||531 to 670||881 to 960||604 to 627|
It is worth noting that these credit score scales are not set in stone and the thresholds can change. They should only be used as a guide to give you an idea of how a lender may view your credit file.
Each lender has a different opinion on what it considers to be good or acceptable for its products and will judge your application using its own eligibility criteria.
» MORE: Learn more about what counts as a good credit score
How are credit scores calculated?
Credit reference agencies use data from your credit report to calculate your credit score.
The UK’s three main credit reference agencies, Equifax, Experian and TransUnion, collect financial data for your credit report and generate a credit score.
Your credit report contains personal information and details about your borrowing history including:
- Address history: Your current address and any previous addresses.
- Credit history: Financial credit agreements, such as loans, credit cards, mortgages, overdrafts, mobile phone contracts, car finance and any late or missed payments.
- Credit applications: How many applications for credit you have made, including those where you have been rejected.
- Public records: Electoral roll information, any county court judgments (CCJs), bankruptcies or insolvencies
- Financial ties: This includes anyone you have taken out joint credit with – for example, a joint mortgage or bank account.
Your credit report does not show information about your:
- student loans
- ISAs or savings accounts
- council tax
- employment history
- criminal record
- medical record
- parking or driving fines
How to check your credit score
You can check your credit score for free through online platforms that use data from the main credit reference agencies. The following platforms let you check your credit score for free:
- ClearScore (uses Equifax data)
- Credit Karma (uses TransUnion data)
With Experian, you can also sign up for a free account that offers a monthly view of your credit score, but you have to upgrade for a more detailed credit report or to check your score more frequently. Equifax offers a 30-day free introductory trial, but then you have to pay a monthly subscription. With TransUnion, you can access your credit score for free through Credit Karma.
Each platform provides a full credit report that includes your credit score. They also offer credit monitoring services that give monthly updates about your credit score and share tips on how to improve your credit rating.
Most free credit score platforms include eligibility checkers that calculate how likely you are to be accepted for loans and credit cards based on your credit history.
All three credit reference agencies have to offer a free statutory credit report by law. A statutory credit report doesn’t show your credit score. It gives a basic snapshot of your financial history including:
- credit agreements
- missed or default payments
- electoral roll details
» MORE: Find out how to check your credit score
How to improve your credit score
There are lots of simple ways to improve your credit score and boost your chances of being approved for new credit.
A few quick ways to improve your credit score include:
- Registering to vote: registering to vote helps lenders verify where you live which could boost your credit score.
- Checking your credit score regularly: understanding your credit score and credit history can help you find areas to improve. It also helps you to spot mistakes or fraudulent activity that could damage your score.
- Repaying on time: you can show lenders that you are a reliable borrower who can manage credit by keeping up with repayments.
Sometimes credit scores can take a while to improve and, in some cases, it may take a few months or more before your credit score increases.
The main thing to focus on is getting your finances on the right track by using credit responsibly and keeping up with repayments. In time, you should start to see your credit rating improve.
» MORE: Find out more tips on how to improve your credit score
Image Source: Getty Images
About the Author
Brean was a writer and spokesperson for NerdWallet who covered a variety of topics including money-saving tips, credit scores and managing debt. With over five years' experience in finance, she…
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