Good credit scores

A credit score shows how lenders may view you when you apply for credit.

Higher scores mean lenders view you as lower risk. A good score is good if you're hoping to apply for a loan, get a new credit card, or even a mortgage. Making sure your score's good, or better still excellent, means you're more likely to be accepted, and offered better rates. So, let’s look at what a good credit score is, how it's calculated, and what factors make it ‘good’.

“Magic” number?

When it comes to your score, there's no “magic” number. Each lender looks for different things in potential customers. You may meet one lender's profile but mightn’t tick the boxes for another. Experian use scores between 0-999 and consider a 'good' score to be anywhere between 881 and 960, with 'fair' or average between 721 and 880. Before you apply for credit, it's a really good idea to check your credit score with them or others such as Clearscore to see how you rate.

How is a credit score calculated?

Lenders will look at information from your credit report, application form, plus any information they hold on you (if you're an existing customer), whenever you apply for credit. This data is used to calculate your credit score. Lenders have different ways of calculating it, because they each has access to different information and different lending criteria.

Generally, the higher your score, the better your chances of being accepted for credit, at the best rates.

There are 4 Credit Reference Agencies (CRAs). Each calculates a different version of your credit score, but there are certain factors all consider, including - how much you owe, whether your payments are made on time and how often you apply for credit. Here’s more about what affects your score.

How can you get a good credit score?

There are plenty of things you can do to help improve your score, but it can take time and patience, and some will-power too.

Ways to improve your score:

• Register on the electoral roll at your current address. This helps companies confirm your identity.
• Improve your credit history. If you’ve little or no credit history it’s difficult for companies to score you, which may result in a lower score.
• Pay your accounts in full, on time each month. This shows lenders you can handle credit responsibly.
• Keep your credit utilisation, the percentage of your credit limit you actually use, low. . If you’ve a limit of £3000 and used £1500 of it, your utilisation is 50%. A lower percentage is usually seen in a positive light and should help your score go up.

Once you've improved your score, here's some tips to keep I up there:

• Limit the number of credit applications you make. Don't be tempted to make too many in a short space of time. Lenders view you as too reliant on credit, and a higher risk if you do.
• Close unused accounts. If the credit available to you is too high, lenders may think you won't be able to handle any more.
• Keep payments up to date. Slow and defaulted accounts will drop your score. Accounts are slow when you're late on payments. Defaulted accounts are when your relationship with the company has broken down due to several missed payments.
• Only borrow what you know you can afford. If you get into trouble with debt the records will stay on your credit report for up to six years and will damage your score.

Keep an eye out for fraudsters. Their activity could hurt your score badly. So, try to check your credit report  for any suspicious signs.