We all hear the words ‘credit score’ being bandied around. This is especially true when you’re looking to take out some form of credit, whether that’s a credit card, loan or you want to get on the property ladder and take out a mortgage. But it might surprise you to find out there’s no actual universal system that gives the same credit score measure. That’s right – there is no such thing as a universal credit score.
So even though you might think you have a unique credit score, this is actually a myth. Before you register to find out what your score is, remember that none of the agencies will mark you in the same way. In fact, it’s highly unlikely any of the agencies will measure or give you a score that show similarities.
The credit reference agencies
Say you applied for your score today through the free services for the three main credit reference agencies – that’s ClearScore for Equifax, Noddle for CallCredit and CreditMatcher for Experian. ClearScore marks you out of 700, Noddle gives you a score out of 800 and CreditMatcher scores you from 999. When you look at this, you can see that the chances of getting the same score for each one are slim.
Similar to how credit reference agencies have their way of measuring your score, each lender will also have their own criteria. This is based on what they look for and how they decide whether or not to let you borrow from them. Lenders also tend to use at least one of the three main credit reference agencies as a means to access your credit history. They’ll then use this information to create a ‘credit score’ for you and this score will help them decide if they’ll lend to you or not, and at what rate. But remember – this credit score is only for that specific lender – it wouldn’t be used by anyone else.
So if you’ve been turned down by one lender for one type of credit, it doesn’t automatically mean another is going to the same. It will depend on the type of credit you seek and how you’ve managed credit in the past.
So what now?
It may be confusing to read there’s no such thing as a universal credit score, so what’s all the fuss about? Well, even though you don’t have a universal credit score, what really matters is your ‘credit history’ – and this can count for a lot.
This is how you’ve managed credit over the last six years. It shows if you make payments on time, if you’ve missed payments, gone over an overdraft or exceeded a card limit. It also covers your bill payments – that’s your utilities and your mobile phone contract. In other words, it gives a good all-round picture of how well you manage credit.
Paint a good picture
A lender uses your credit history to measure how likely you are to keep up repayments if they let you borrow. Missing payments, not paying on time, having a County Court Judgement (CCJ) – there are all things that can encourage them to think you’re a potentially risky borrower.
Other factors are also taken into consideration – for example, the amount you want to borrow, the type of credit you’ve applied for, how much you earn, your incomes and your outgoings. This information paints a bigger picture of your finances together with your credit history. If you want lenders to see you in a good light, then it’s important to clear any debts and always repay credit on time.
And if you’ve never had any credit and assume that this means you have a good credit history, it’s actually difficult for a lender to visualise what you’re like as a borrower – meaning some could be less likely to lend to you.
Options for you
For anyone who’s struggled with borrowing in the past or if you’ve never borrowed, don’t worry – the road ahead is not so bleak. There are lenders who will accept those with poor credit history or none at all.
A credit building card like the one thinkmoney offers can help you build your credit, as long as you ensure you repay on time and in full. The thinkmoney credit card has an APR of 35.9% APR Representative (variable). This will mean you’ll avoid any extra charges or fees from lenders and you can start to give yourself more opportunities when it comes to credit in the future.
Think Money Ltd is the credit broker for the thinkmoney Credit Card. Capital One is the lender, and they pay Think Money Ltd for their services.