What’s a good credit score?

  • What’s a good credit score is a question often asked and a difficult one to answer because your credit score is often clouded in mystery.  Everyone has one and nobody can really tell you how it is calculated.  In fact, the credit score you can obtain from credit reference agencies, such as Experian and Equifax, is different to the one that the individual lenders calculate themselves.

    What is common between them all is the information that they are using to make their assumptions.  Your outstanding credit commitments like credit cards and loans together with any previous bad credit are used in the calculation.  Your previous use of credit and how this was conducted will also play a major factor in this.

    You should take time to understand your credit score and manage the best way to boost or repair anything that doesn’t give you a perfect or ‘excellent’ rating. 

    There are paid services online that allow you to look as often as you like at what information they are holding.  We are also starting to see ‘free’ reports that again let you pick up and correct anything you do not agree with before any companies use the information.  Important, as it is this information, that will greatly dictate whether to lend to you.

    Speaking to a regulated advisor before you make any applications is often the best thing to do.  They are going to be able to work with you to see what, if anything, on your credit file is going to hinder you.

    If you have entries due to previous adverse history, such as defaults and CCJ’s, then they know to only speak to those lenders that will show flexibility in those areas.  If the adverse is more recent, then they will work with you to get your situation back to the point where an application is more likely to receive a positive response.

    You can of course do a few things to help yourself and your credit score.  If you think that you are going to need an organisation to lend you money in the not too distant future then.

    • Avoid pay day loans.  Other lenders can consider these as an example of poor money management.  Remember, you are asking to borrow money from them; you don’t want them thinking you a bad risk.
    • Make sure you are on the voters role.
    • Try and reduce other debt that may affect your affordability for the new loan.
    • Make sure that your current outstanding credit is up to date and paid on a regular basis.  Missed payments don’t look good.
    • Check your credit file is accurate and that there is nothing on there that shouldn’t be or that is wrong.
    • Too many credit searches in a short space of time that also are a negative.  Each search footprint can reduce your score and chances of being accepted.
    • Many credit searches in a short space of time that also are a negative.  Each search footprint can reduce your score and chances of being accepted.

    Finally, the advisor you speak with will, in many instances, be able to find out if you are eligible for the money by doing what is called a soft foot print.  Many lenders now offer this service where only you, they, and the credit reference agency, can see the search has been carried out.  You can check this at the time of application.