You’ve probably heard the term ‘credit score’ numerous times – especially if you’re in the process of getting a mortgage or a credit card – but do you know what it actually means? And, how important is it?
Experian is one of three credit reference agencies in the UK. It collects data about your financial history and behaviour and uses it to curate a three-digit credit score, which is then used by lenders and other organisations to assess your creditworthiness.
How is my Experian credit score calculated?
Experian is a credit reference agency (CRA) founded in 1996 and headquartered in Dublin, Ireland. It collects information on over 1 billion people and businesses across more than 30 countries worldwide, making it the largest of the three CRAs in the UK.
The company provides a range of financial services for individuals, but it is primarily used as a provider of credit reports and credit scores. It works similarly to how a FICO score does in the US, which can be accessed with the last four digits of your Social Security number.
Experian uses a credit rating system ranging from 0 to 999. Your individual credit score is based on information collected from various sources, such as banks, building societies, credit card companies, and lenders. This collective information is sometimes referred to as your ‘credit score ingredients’.
When you apply for a credit product, lenders can access your credit report and use the information included to decide whether or not to enter into a credit agreement with you.
It can be useful to access your own credit file from time to time to check all the information is correct and to get an idea of what lenders would see when they access your record. If you notice anything that doesn’t seem right, you should contact the relevant CRA with proof of the mistake and ask them to update their record accordingly.
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How can I check my free Experian credit score?
Checking your Experian credit score is easy. Simply register for a free account to gain access to your credit score, which is updated every 30 days. If you haven’t applied for further credit and you pay any existing credit accounts (e.g. credit cards) off as normal each month, your credit score is unlikely to change too much month to month.
You can also check your Experian credit score through a third party, such as ClearScore, Checkmyfile, or MoneySavingExpert’s Credit Club. This can allow you to access a snapshot of all three of your credit reports for a more well-rounded view of your financial health.
How can I check my free Experian credit report for free?
Experian recently brought back the option for users to check their free credit report via the app. If you already use Experian to access your credit score for free every 30 days, you can use the same log-in information to sign in to the app.
Remember, this service is only available to users of the app and is not an option if you sign in to your online account via your computer or phone browser. It’s also worth noting that while you’ll get access to both your credit report and credit score, you’ll need to register for a paid membership if you want tailored insights or recommendations based on the information provided.
Is my Experian credit score the same as my credit score from other credit reference agencies?
Some organisations report information to all CRAs while some only report to one or two, so your credit score can differ slightly depending on where you look. This means that your Experian credit score will be slightly different from your TransUnion credit score or your Equifax credit score.
CRAs also vary when it comes to the scoring models they use and the weighting they give certain factors, meaning that some details in your credit report can weigh more heavily than others. For example, one CRA might put more emphasis on missed payments while another might focus more on your credit history as a whole.
Despite this, it’s crucial to note that one credit score isn’t more important or more accurate than the other. Each of your three credit scores will change over time as you make financial decisions and your respective credit reports are updated.
If you’re looking to apply with a specific lender, it can be useful to check which CRA they tend to use. This can allow you to check whether they use your Experian credit score or another credit score altogether, which can help you get an idea of what they see when you submit your application.
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What is a good credit score according to Experian?
There is no ‘magic number’ when it comes to your credit score. Generally, the higher your credit score is, the better your chances of being accepted for a credit product.
Put simply, if you’re planning to apply for a loan, mortgage, or credit card, it’s worth making sure your credit score is the best it can be. This will boost your chances of not only getting approved but qualifying for favourable terms.
Experian, like most CRAs, separates credit scores into different categories. According to their website, this is how they classify individuals’ credit scores:
|
Excellent |
961-999 |
|
Very good |
881-960 |
| Good |
721-880 |
| Poor |
561-720 |
| Very poor |
0-560 |
It’s still possible to get credit with a less-than-ideal credit score, but you might be subject to higher interest rates and exempt from a wider range of top lenders. Similarly, an excellent credit score doesn’t guarantee you’ll get a good deal or that you’ll even be accepted for credit in the first place.
Remember, your credit score should only be used as a general guide to help you see how lenders view your financial history and to help you determine how likely you are to get approved for credit.
Which things can negatively affect my Experian credit score?
If you’re looking to apply for a loan or a mortgage in the near future, it can be useful to know which things could potentially stop you from being approved. Here are some actions that can negatively affect your score:
Maximising your credit utilisation
Your credit limit is the maximum amount you can borrow on a credit card, usually expressed as a percentage. Most lenders prefer that you don’t owe more than 25-30% of your credit balance each month, as using more than this can suggest that you’re reliant on credit and you wouldn’t be able to afford more monthly repayments if you were to be approved for any new accounts.
It might be possible to increase your credit limit. If your lender agrees to this and you don’t increase the amount you use each month, your credit utilisation will decrease and your credit score might improve as a result.
Missing regular payments
Missing a series of monthly payments can not only lead to you being in debt to your lender but also your lender issuing a default on your account. Having a default on your credit report can significantly lower your credit score for up to six years, making it extremely difficult to get a lender to approve you for most types of credit during this time.
It can be difficult to predict the effect of a missed payment. For example, while one missed payment can have a smaller impact than multiple missed payments, a single late payment can be enough to significantly lower your credit score.
Having little to no credit history
It might seem unfair, but having minimal payment history can make it difficult to grow your credit score as CRAs have nothing to base your creditworthiness on. This lack of information can then make it difficult for lenders to know whether or not you’re a responsible borrower.
Most lenders also look at the average age of your credit accounts. If you’ve never had a loan, mortgage, phone contract, or utility bill in your name, your credit score might be low due to the lack of financial information available. To reduce the potential impact of having no credit history, consider taking out a credit builder credit card for small expenses each month or moving your household bills so they come out of your account.
Mistakes on your credit report
It is your responsibility to ensure the information contained on your credit report is accurate and up to date. It’s recommended to check your credit report at least once every three months to prevent mistakes from unfairly dragging your credit score down. This will only count as a soft credit check, meaning it won’t leave any trace on your credit report or affect your score in any way.
Something as small as the wrong surname or an old address could be causing discrepancies between the information contained on your credit report and the electoral roll, making you ineligible for some forms of credit. Regularly checking your credit report could also alert you to any instances of attempted fraud linked to your name.
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How can I improve my Experian credit score?
It can be disheartening to discover your credit score is worse than you originally thought, but this doesn’t mean you’ll be exempt from credit forevermore. Thankfully, there are many things you can do to improve your credit score, including:
Register to vote
If you haven’t already, you should register on the electoral roll at your current address. When you do this, your details will be added to your credit report and lenders will be able to confirm your name and address when you apply for credit.
This rules out the possibility of fraud and boosts your creditworthiness, both of which can increase your credit score. It also saves time in processing credit applications as it means that lenders won’t need to ask you to prove your identity in other ways.
Maintain a long credit history
One of the biggest factors contributing to your credit score is your ability to make payments in full and on time. This will show that you’re capable of handling credit and can be trusted to make your repayments as they’re due.
The longer you maintain regular payments on your other outgoings like your mortgage and bills, the more you’ll show lenders that you’re a reliable borrower. Additionally, the more old, well-managed accounts you have, the more your credit score is likely to rise.
Limit new credit applications
When your credit score is still compromised, making applications for more credit can stop it from getting back to a healthy number – even if you’re actively taking steps to improve your finances.
It doesn’t matter which type of credit you’re applying for and how much you’re asking to borrow; a hard search (or hard inquiry) will be noted on your credit report for up to 12 months and will cause further harm to your already-damaged credit score.
Sign up for Experian Boost
Experian Boost is a free feature that allows you to add an extra level of financial information and security to your credit report. By sharing more about your spending habits (e.g. council tax, savings, and subscriptions), Experian can get a more well-rounded view of your money habits and will update your credit score accordingly.
As long as you’re meeting your payments as expected and living within your means, signing up for this service will likely cause an immediate boost to your credit score. However, it’s not a guarantee that doing so will lead to a positive change.
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Conclusion
Experian is the most popular credit reference agency (CRA) in the UK. It collects information on your financial behaviour and uses it to calculate a three-digit number called a ‘credit score’. Your credit score helps lenders determine how likely you are to make repayments based on your credit history.
Generally, the higher credit score you have, the better your chances of getting a lender to approve you for credit.
There are various things that can increase and decrease your credit score. Knowing what you should – and shouldn’t – be doing can help you boost your credit score, improving your chances of being approved for a loan or a mortgage.
