Why we have different credit scores with different bureaus and what they mean.

Sometimes, attempting to navigate and understand financial jargon can feel like a minefield. It’s possible that you’ve heard about credit scores, although you may not be familiar with their purpose and how exactly they can affect you.

 

1. What is a credit score?

‘Your credit score is based on information gathered by credit reference agencies and helps to paint a picture of how you handle your finances. It factors in influences such as repayment history, debt, and your borrowing habits. When applying for credit, potential lenders will want to determine your “creditworthiness” to gain an insight into how likely you are to make your repayments on time.

‘35% of UK adults have never checked their credit score; however, it’s usually straightforward to do so. All you need to do is create an account* with one of the UK’s three major credit reference agencies: Experian, TransUnion, or Equifax.’

2. Why do different credit reference agencies provide different scoring systems?

‘Each credit reference agency has their own unique scoring system, so you may notice discrepancies in the numbers you’re shown between sites. For example, your score may be classed as ‘good’ on one site, but ‘excellent’ on another.

‘Another reason for score inconsistencies is to do with a delay to data reporting. Lenders and providers may update the credit reference agencies at different intervals, leading to a period of temporarily outdated information. In addition to this, it’s possible that not all lenders and providers share reports with each of the credit reference agencies. If you’ve noticed that this is the case, and one credit reference agency has updated before one of more of the others, you should take your score from here, as it is the most accurate and up-to-date figure.’

3. Why is it important to have a good credit score?

‘Lenders will look at your credit history and score should you choose to apply for a credit product such as a mortgage, loan, or credit card, but could even include insurance, utilities, or a mobile phone contract.

‘Having a good credit score could mean that you’re presented with a wider range of borrowing options and more desirable rates of interest. On the other hand, having a low credit score could limit your borrowing opportunities, and if you are approved for credit, you could be offered a higher interest rate, and you may not be able to borrow as much money as you need.’

4. Bad credit v no credit

‘It’s important to know the difference between having a bad credit score and having no credit history at all. Bad credit is usually a result of poor financial management, such as falling behind on or failing to make payments on past credit commitments, declaring yourself bankrupt, or having a county court judgement (CCJ).

Sadly, poor credit may sometimes be down to circumstances out of your control, like being a victim of fraud.

‘Having no credit history at all is often also referred to as having a “thin” credit file or being “credit invisible”. This is quite common in those who have never borrowed credit or paid bills before. Lenders may be wary of accepting your application as they have no evidence of how you’ve managed credit in the past.

Around 1 in 5 people in the UK have a poor credit score, whereas 1 in 10 are considered “credit invisible.”’

5. How to improve your credit score

‘Fortunately, there are various things you can do to work towards a healthier credit position,’ Dan says.

· ‘Register to vote. This may seem like an odd way to attempt to boost your credit score, but there is a logic behind it! Being on the electoral register will provide potential lenders with a quick way to verify your personal information, including your address.

· Check your credit report for errors. Believe it or not, even something like a misspelled address or incorrect postcode could have a negative effect on your credit score. If you notice that your details are incorrect, contact your provider as soon as possible and ask them to update your report.

· Make sure all your monthly bills are paid on time.

· Keep on top of any current credit commitments. This information is fed back to the credit bureaus and demonstrates that you are able to borrow responsibly.

· If you have a credit card, stay well within your credit limit.’

 

-ENDS- 

About Viva Money 

 

Viva Money is not a lender but is a fully regulated and authorised credit broker. Viva Money is a registered Trading Name of Digitonomy Limited, Registered in England and Wales (Company number 08385135), Registered Office; Steam Mill Business Centre, Steam Mill Street, Chester, Cheshire, CH3 5AN. Digitonomy Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference number: 690249. Licenced by the Information Commissioners Office, (registration number ZA007309)       

   

Website: https://vivamoney.co.uk/ 

   
Dan Whittaker - Personal Finance Expert at Viva Money    

   

Dan has worked in the consumer finance sector for over a decade in a number of roles, including developing and maintaining commercial partnerships, marketing, and digital development.    

    

Dan has strong market and product knowledge across a range of consumer finance products including, but not limited to, credit cards, savings, loans, and mortgages. 

*Please be aware that while Experian is a free service, both TransUnion and Equifax charge a monthly account fee of £14.99 and £14.95 per month respectively, once the 30-day free trial has come to an end. Prices correct as of 8th April 2024.