What Is a Good Credit Score in the UK?
When you apply for credit, finance providers will be judging your application based on your credit score. Lenders will view you as a less risky candidate if you have a good score. So if you’re confident your credit score is up to par and you’re waiting for an answer on a loan, rest assured that you’ve got a fair chance of approval.
However, because there are several credit agencies in the UK, that all produce their own credit rating, it’s hard to know what is considered to be good or not. Considering the fact that you’re significantly more likely to get accepted for a loan if you have a high credit score, it’s important to know what they all mean.
In this article, we’ll be going over what a good credit score is, how it's determined, and the elements that contribute to a good score. Let's go! 😊
How Is a Credit Score Calculated?
Lenders will review information from your credit report, your application form, and any other information they currently have on you (especially if you're an existing customer) whenever you apply for credit. Your credit score is then determined using all of this information. Every lender calculates creditworthiness differently, partly because they all have access to different pieces of information and have varying requirements.
The general rule though is that the better your score, the more likely it is that you will be approved for credit and get the best terms, i.e. a low interest rate.
Credit agencies, which you might have seen being called CRAs (Credit Reference Agencies) are who determine your credit score. Although there are differences in how each agency determines it, there are some common characteristics they all take into account, such as the amount you owe, how frequently you request credit, and whether your payments are completed on time.
Why Your Credit Score Matters
The benefits of maintaining a good credit score are huge. That's because having good credit allows you to have access to a wider selection of loans, credit cards, and mortgages. You might also benefit from much lower interest rates and generous credit limits, depending on what deals you shop around for. But what is the minimum good credit score?
What's a Good Credit Score Uk?
Have you found yourself typing “how good is my credit score” into Google? Yep, we know, it can be tricky to navigate the world of credit scores. Especially because different credit score bureaux employ different scoring methodologies in order to determine credit ratings. Nevertheless, they will all be able to tell you if your score is bad, good, or excellent. You're doing well if your score is between 60 and 66% of the highest score you can get.
So, for example, Equifax now has a maximum score of 1000. So, 531 to 670 should be your goal range. Anything over that is considered "great" or "very good", so if that’s what you’ve got, congrats! A credit score range provides you with a general idea of how strong your credit is, which influences your chances of getting the best offers on credit cards, loans, and mortgages.
Here is a recap of what is considered fair, good, and excellent credit scores with each credit agency:
- Fair: 721-880 with Experian, 380-419 with Equifax, and 566-603 with TransUnion
- Good: 881-960 with Experian, 420-465 with Equifax, and 604-627 with TransUnion
- Excellent: 961-999 with Experian, 466-700 with Equifax, and 628-710 with TransUnion
How To Get A Good Credit Score
A solid credit score is one factor that influences lenders to approve your application. That is why it is important to understand what factors can affect your credit score and how to enhance it. Thankfully, there are many things you can do to raise your credit score. So, whether you've just been denied credit or simply wish to apply in the future, let’s look at a few of the ways in which you can boost your credit score.
- Register to vote at your current address.
- Establish a credit history. Companies may find it challenging to rate you if you have little or no credit history, which could lead to a lower score.
- Your monthly payments should be made promptly and in full. This demonstrates to lenders that you are trustworthy and have good credit management skills.
- Maintain minimal credit utilisation. The portion of your credit limit that you use should be kept at 25% of your limit at all times.
- Don't apply for too much credit at once. Avoid the temptation to make too many loan applications in a short period of time because this may cause lenders to consider you as riskier. A note will be made on your credit report for each application you make. Finance providers are able to see this, therefore it's wise to spread out any applications.
- Close inactive accounts - lenders might believe you can’t handle any more credit if the quantity you have accessible to you is too large.
- Only borrow what you can afford, you know. Debt problems that result in CCJs, IVAs, or even bankruptcy will negatively affect your credit score for up to six years and appear on your report.
What's A Good Credit Score To Get A Car Loan?
Like most people in the UK, you'll probably need a car loan to help pay for your new car if you want to purchase one. Your lender of choice will perform a credit check on you as part of the application process.
Your ability to obtain a car loan depends in large part on your credit score. To get a loan with a good interest rate, you'll typically need at least prime credit, which is a credit score of 661 or higher, depending on the credit agency.
Of course, you can still get a loan if your credit is bad, but you will likely have to pay more for it in interest over time. Some car finance providers specialise in loans for people with low credit scores, so do feel free to shop around if that’s your case.
Here at Carmoola, we can help you get the car of your dreams with our handy app. You can get an instant decision on your car loan, and manage the whole process on your phone. Check it out, or contact us if you have any questions! 🚗 🌈