This is a question that gets asked all the time. How is the mystical credit score arrived at?
Credit reference agencies, calculate credit scores so you can get a view of your status with lenders. Lenders use credit scores to determine whether to lend to you. Your Experian Credit Score is visible, but do you understand how it was calculated?
To evaluate your mortgage application, lenders will look at the information in your credit report. You will receive more points for characteristics that demonstrate your responsible credit management, and fewer points for factors that lenders don’t consider favorable such as missed payments, defaults, or high balances on credit cards. After they have examined every aspect of your report, they add it all up to offer you an Experian Credit Score, which ranges from 0 to 999.
A few of the things they consider:
- Your level of debt
- The age of your credit accounts on average
- The applications you have submitted
- Whether you pay your bills on time
- The amount of credit you have access to
- Whether you are listed as a voter on the roll.
- CCJs, defaults or whether you have ever been bankrupt
Why does the Experian score differentiate to that of the lenders?
Your Experian Credit Score is determined using the credit data in your Experian Credit Report. Your Experian Credit Score grants you a trustworthy sense of how potential lenders may regard you because it is based on the same credit information that they could use. But there are several credit scores with a number of credit reference agencies. All lenders compute credit scores differently because they consider several factors when determining whether to lend to you.
Lenders will also examine your application information, their records if you are already a customer, and their lending criteria in addition to your credit report.
I have a credit score, is it good?
- Fantastic 961 to 999
You could be eligible for the better credit cards, loans and mortgage rates (nothing is guaranteed though as the providers criteria also has to be met).
- Good 881 – 960
The majority of credit cards, loans, and mortgages should be approved for you; but the finest offers might not.
- Fair 721 – 880
Your credit limits might not be particularly great, but your interest rates might be fine.
- Poor 561 – 720
You might be approved for credit cards, loans, and mortgages, but the interest rates on those things could be higher.
- Extreme Poor 0 - 560
You have a higher chance of being turned down for credit cards, loans, and mortgages and the providers criteria will be important here.
Can your credit score change?
When information on your credit report changes, your credit score may too. Over time, some detrimental effects giving you a poor score may lessen. It is beneficial to check your credit score every few months or before you apply for a mortgage. Please keep in mind that monitoring your personal credit score has no negative effects as you can search your own credit file as many times as you like.