Over four in five adults hold at least one credit or loan product, according to the latest data from the FCA Financial Lives Survey. Credit is now an accepted part of everyday life in the UK. However, many of our members are unaware of the impact of a credit score and how best to manage their credit responsibly. Here, we’re going to cover what you need to know about credit scores and how to get free access to your credit report today.
What is a credit score?
A credit score provides insight into your financial history and is used by lenders when you are applying for credit. Normally, the higher your credit score, the lower risk you appear to potential lenders. This is important because lending is about measuring risk for both parties, and the higher the score, the better your chance of being accepted for products like loans, credit cards and mortgages.
Your credit report contains details of everything credit reference agencies (CRAs) know about you. It’s very important that you check it regularly, especially before any major credit application, like a loan.
How do credit scores work?
Your credit score is expressed as a figure based on the numerical summary of the data held in your credit report. In the UK, there are three CRAs: TransUnion, Experian and Equifax. Each holds vast amounts of data used by credit lenders to calculate your score and produce your credit report.
Each CRA has a slightly different scoring range, so there’s no single universal credit score. A good score normally means you could be offered better interest rates and deals, potentially saving you a lot of money.
Credit score ranges by Credit Reference Agency
| CRA | ‘Poor’ score | ‘Fair’ score | ‘Good’ score | ‘Excellent’ score | Full range |
| Equifax | 0 to 438 | 439 to 530 | 531 to 810 | 811 or higher | 0 to 1,000 |
| Experian | 0 to 720 | 721 to 880 | 881 to 960 | 961 or higher | 0 to 999 |
| TransUnion | 0 to 565 | 566 to 603 | 604 to 627 | 628 or higher | 0 to 710 |
Lenders have their own individual ways of calculating your creditworthiness, depending on their appetite for risk. They may also consult with one or more CRAs when calculating your score.
As well as your credit report from a CRA, a lender will include other relevant information, such as:
- Repayment history on previous applications
- Your income and employment
- Whether you’re in debt, and the amount
- Affordability
- Court information (lenders will look for County Court Judgments (CCJs) or insolvency, which can severely impact your creditworthiness)
Lenders don’t normally disclose how they calculate scores, making the system difficult to predict precisely.
The Financial Conduct Authority (FCA) regularly reviews the credit market. It emphasises improvements that allow better outcomes for all consumers, including those classified as vulnerable. The FCA pushes for better access to information, higher data quality and more transparent practices. This can include proposals for easier ways for consumers to correct any incorrect information, improve consistency across CRAs and published guidance or standards helping consumers to understand their credit information.
What else is a credit score used for?
Financial services lending money are the main users of credit reports from CRAs. However, there are many other organisations that may access this information.
For example, employers may check a candidate’s credit score when considering their application as part of background screening.
They look out for signs of financial distress that might indicate risk of theft or fraud, such as:
- Frequency of missed payments
- Excessive debt
- Any evidence of mishandling finances
Some landlords may also check the credit scores of potential tenants to see if they’ve had issues paying bills in the past. It’s important to note that they need permission to do this from the tenant first.
Mobile phone, car insurance and utility companies will normally complete a credit check for the same reason. They want evidence that you can pay your bills on time and are, therefore, a trustworthy customer.
GMBCU understands how important your credit score is to you. We want all our members to feel in control of their money. Your credit score is central to managing your money. We recommend that you check it regularly and improve it wherever possible. For 10 ways to improve your credit score, check out our blog here.
The first and most important action is to sign up for free online access to your credit report. A great place to access your credit report for free, as well as other useful financial information, is through sites like Money Saving Expert’s Credit Club. There are, however, many other organisations providing free credit score checks, so have a look around and see which one works best for you.
At GMB Credit Union, we’re here to help you manage your money with confidence and clarity, and your credit report gives you a solid indication of good money management. To find out about how we can help you understand your credit score, as well as lots of other helpful guides and hints, head over to our resources page for more!