How Your Credit Score Is Calculated

How Your Credit Score Is Calculated

Who calculates my credit score?

Unlike other countries, there isn’t a universal credit score in the UK. Here, credit reference agencies such as Transunion, Equifax and Experian provide data to lenders for risk assessments, who in turn report back to the agencies on whether the customer has maintained their repayments. As lenders may use 1, 2 or all 3 of the credit reference agencies, the score you receive from each is likely to be different.

How is my credit score calculated?

Not only do different credit agencies use different criteria, they also score you using different scales. For example, with Experian you would be scored out of 999 and with Credit Karma, which uses Transunion and Equifax, you would be scored out of 710.

What these companies consider a good, bad or average credit score is published on their websites but how they determine this varies by agency.

There are five main points agencies will consider when determining your score:

  1. Your payment history - have you paid your credit card on time? Have you missed any payments on any instalment loans? This is considered by most to be the biggest contributing factor in calculating your score.
  2. Your credit utilisation ratio – how much of the credit available to you across your credit cards have you used.
  3. Length of credit history – how long have your credit accounts been open? Generally, credit accounts that have been open longer and well maintained are better for your score.
  4. Credit mix – the types of credit account you have open. Do you have credit cards, auto loans, a mortgage? A greater variety of accounts is generally considered better.
  5. New credit – have you applied for any forms of credit recently? A large number of hard credit searches with different companies could have a negative effect on your score. You can read more information about that on our blog.

You can check your credit score for free by visiting Experian’s website or Credit Karma.

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