Those adverts on television about “knowing your numbers” in terms of credit scoring prompted thousands of us to download apps onto our phones to track our credit score. Typically, the app will show some sort of traffic lights system. If you’re in the green, your credit score is healthy, amber means that perhaps there is some work to be done to improve matters, and red means that you might struggle to access credit. It all makes it very simple and straightforward, but putting a definite number on a good credit score isn’t nearly as easy as you’d think.

Credit scores are important if you are thinking about taking out a new mortgage or loan, or even applying for 0% finance for a new kitchen or furniture. If you have a good credit score, then you have more choice over which financial products to go for and will probably be able to secure better interest rates than someone who has missed payments in the past.

Credit Reference Agencies

Although your bank and other lenders do hold information about you, credit scoring is done by one of the three main agencies in the UK – Equifax, Experian, and TransUnion. Each of these organisations does things different and will have differing information about you. Each will evaluate risk in a different way, which goes some way to explaining why you might get a different credit score number when you check on each of the three sites. Lenders usually deal with one of the credit referencing agencies, and each lender has its own policy for checking credit scores at one, two or all three of the referencing agencies. If you think that your score at one of the three agencies is much lower than it should be, then this could be because there are errors on your account. Ask the agency for your full credit file and check it for any errors. Mistakes can be corrected but it takes time, and you will be asked to provide evidence to support your claim; they’re not just going to make changes on your say so.

A ”Good” Credit Score

A credit score is only a general indication of your financial health, and each lender will make its own decisions about who to lend to, taking into account a wide range of factors. Having said that, it’s definitely true that people who have a good credit score are more likely to be accepted for credit than someone whose credit score is rated as fair or poor.

Each of the three main agencies has their own scale for rating credit scores. With Experian, for example, the maximum score possible is 999, whereas the Equifax scale only goes up to 700. This can lead to confusion. For example, a score of 600 would be poor on Experian’s scale, excellent on Equifax, and fair on TransUnion. Someone who scores upwards of 800 on Experian though, would similarly find themselves graded as good or excellent on the other two sites also. Your credit score number won’t be the same across all three sites, and it’s therefore more important to look at the band you fall into.

Improving a Bad Credit Score

If your credit is rated as poor, bad or even fair, you might struggle to access the best deals on the market and be forced to take higher interest loans pitched at “risky” customers. Try to improve your credit score by paying off old debts, getting onto the electoral roll, and creating some sort of reminder system to make sure you never miss a payment on any account or loan.