Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • MSE Helen Saxon
    • By MSE Helen Saxon 19th May 14, 5:51 PM
    • 75Posts
    • 42Thanks
    MSE Helen Saxon
    What your credit score really means
    • #1
    • 19th May 14, 5:51 PM
    What your credit score really means 19th May 14 at 5:51 PM
    Hi!

    This is the discussion thread for the



    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.


    Thanks folks,
Page 1
    • InsideInsurance
    • By InsideInsurance 20th May 14, 1:02 PM
    • 22,221 Posts
    • 11,386 Thanks
    InsideInsurance
    • #2
    • 20th May 14, 1:02 PM
    • #2
    • 20th May 14, 1:02 PM
    Avoid the obvious question of if its worth paying for
    • fermi
    • By fermi 20th May 14, 6:16 PM
    • 39,274 Posts
    • 47,103 Thanks
    fermi
    • #3
    • 20th May 14, 6:16 PM
    • #3
    • 20th May 14, 6:16 PM
    Makes things quite clear I think.

    on what your credit score really means

    By Martin | Edited by Johanna




    If you've paid to get a credit score from one of the credit agencies, how reliable is it? We run through the truth about credit scores.

    I’ve just found out that my credit score has dropped – should I be worried? Right, hold on there for a second. Actually, you don't have a credit score in the UK, you don’t have a credit rating, and there’s no such thing as a credit blacklist.
    So, when you say your credit score has dropped – what exactly do you mean by that?

    Well, I paid a credit reference agency to check my credit score and it's dropped. OK. So you went to one of the credit agencies – Equifax, Experian and Callcredit – and paid them a sum to get your 'credit score'. You'll get a score up to 600 from Equifax, up to 999 from Experian and up to five from Callcredit.

    That's very common, and it's common to be confused about exactly what this is.

    So I do get a score, but it's worthless? What you have to understand is this score doesn’t really mean that much. The first thing you need to appreciate is when you apply to a lender is that it will judge you based on three criteria.

    Firstly, your application form details (which the credit reference agencies don’t have). Secondly, any past dealings you’ve had with that lender (which the credit reference agencies might not know). And thirdly, the information contained in your credit reference files (which the credit rating agencies do know).

    So, the first thing to understand is that this score is based on incomplete information. The next thing to understand is different lenders are looking for different things, so they score you differently.

    Just because one lender rejects you doesn’t mean another lender will do the same. The idea that this is all based on some simple score given to you by one of the credit reference agencies is false. At best, it's just an indicative guide to roughly how good or bad a risk you are.

    In that case – why do they sell it to me? Well, the key word in what you’ve just said is ‘sell’. They sell it to you. Credit reference agencies used to make all their money from selling data to lenders. The idea was to help lenders predict your behaviour, which allowed them to assess whether or not you were a good person to lend to. They do that by deciding not just if you are a good or bad risk, but if you will be profitable or not.

    Then some bright spark at the credit reference agencies realised they could generate a business called 'credit management'. It meant they could start to sell you all the other sorts of data and monitoring products for the first time and start making money from it. You ask why they sell it to you – well, it makes them money.

    More 60 seconds

    Does that mean it’s completely worthless and I should ignore it? No, I wouldn’t go that far. It's a loose indication of your rough creditworthiness, and certainly it's worth looking at the things they say are blemishes to see what you can do to improve your credit.
    Where I think scoring doesn’t work is, for example, imagine you closed a credit card with a high credit limit that you'd had a long time, but didn't use any more. It's perfectly possible that your score would drop because a long relationship means it's a credit card that could give a good prediction of your behaviour.

    But it also needs to be understood closing this would count as a positive for some lenders because you had less available credit.
    The fact that your credit scorer has decided to reduce the score it gives you because you've cancelled that card doesn’t mean other lenders will do the same. Nor does it mean there's anything wrong.

    OK – right, I understand. So what should I do to improve my credit? Well, it's important to think of this like a beauty parade. Just as everybody finds different people attractive – so do lenders.

    There are general things you can do to 'rouge' up your credit appearance that make sense everywhere. As this guide's only 60 seconds long, I'm not going to go into that here. Instead, read the full Credit Scores guide.

    It's very important to understand – this is art, not science.

    What works for one lender won’t necessarily work for another – so there's no tried and tested right answer.
    Last edited by fermi; 24-05-2014 at 8:19 AM.
    I'm a Board Guide on the Debt-Free Wannabe, Bankruptcy, Credit Cards and Loans boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com

    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
    • keepcalmandstayoutofdebt
    • By keepcalmandstayoutofdebt 20th May 14, 9:29 PM
    • 2,910 Posts
    • 1,511 Thanks
    keepcalmandstayoutofdebt
    • #4
    • 20th May 14, 9:29 PM
    • #4
    • 20th May 14, 9:29 PM
    I've got no idea!!! I know what's on the report urgh and that only occurred by devine intervention!! never wanted to know my "score"
    As long as there are no strange goings on y'know letters arriving that you don't understand, then I could feel top of the score board! I'm sure someone will burst my bubble one day!
    "If you are caught in a rainstorm, once you accept that you'll receive a soaking, the only thing left to do is enjoy the walk"
    • Anthorn
    • By Anthorn 21st May 14, 7:24 PM
    • 3,173 Posts
    • 817 Thanks
    Anthorn
    • #5
    • 21st May 14, 7:24 PM
    • #5
    • 21st May 14, 7:24 PM
    Yes, lenders look for different things and have their own scoring methods. But very often we don't know what they're looking for until we jump into their swimming pool. We can at least assume that if they allow us to jump into their swimming pool in the first place we at least fulfil their initial criteria which I firmly believe to be the potential to make a profit from us as opposed to a loss.

    Say for example a credit card company loves us to keep a balance so they can charge us interest (which one doesn't?) and bases limits on the amount of a regular payment relating that payment to a minimum payment. Then to possibly ensure limit increases we might keep a balance and make a payment of the same amount every month which is considerably higher than the minimum.

    I agree it's an art form within which is an element of social psychology.

    I love the article. It clears up some fallacies about credit scoring.
    • The Boss
    • By The Boss 24th May 14, 7:59 AM
    • 5,706 Posts
    • 3,771 Thanks
    The Boss
    • #6
    • 24th May 14, 7:59 AM
    • #6
    • 24th May 14, 7:59 AM
    Actually, you don't have a credit score in the UK, you don’t have a credit rating, and there’s no such thing as a credit blacklist.
    by MSE article
    About bloody time they came out and said this explicitly. In fact, that article says most of what I've been saying for the past few years (although I still believe they are worthless when people with defaults have excellent scores).

    *vindicated*

    Now can we make this a sticky?
    Last edited by The Boss; 24-05-2014 at 8:01 AM.
    You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

    Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.
    • rizla king
    • By rizla king 29th May 14, 7:28 PM
    • 2,836 Posts
    • 1,892 Thanks
    rizla king
    • #7
    • 29th May 14, 7:28 PM
    • #7
    • 29th May 14, 7:28 PM
    Or when people with a recent bankruptcy or IVA get a score of 999. Proves how worthless they are.
    • The Boss
    • By The Boss 29th May 14, 8:02 PM
    • 5,706 Posts
    • 3,771 Thanks
    The Boss
    • #8
    • 29th May 14, 8:02 PM
    • #8
    • 29th May 14, 8:02 PM
    Or when people with a recent bankruptcy or IVA get a score of 999. Proves how worthless they are.
    Originally posted by rizla king
    Yep, exactly.

    Please can this be made a sticky?
    You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

    Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.
    • superboobs
    • By superboobs 4th Jun 14, 9:14 PM
    • 52 Posts
    • 41 Thanks
    superboobs
    • #9
    • 4th Jun 14, 9:14 PM
    Credit score
    • #9
    • 4th Jun 14, 9:14 PM
    Well, how interesting...wish I'd known all this yesterday as I've been bullied into paying for our credit scores even though both myself and my husbands credit reports (which we paid £2 each for) were perfect! We are hoping to buy our flat under the Bight to buy and are taking advice from the RTB Co-operative, for a month we've been at loggerheads over this damn credit score, as we've been refusing to sign up for something we don't need and are worried whether it's going to be difficult to cancel. My husband and I are both careful with money and are proud to say that we have NO debt whatsoever and avoid anything which tells you it's 'free for 30 days, cancel any time' don't trust them at all! But that's what we've had to do just to get this so called credit score and I'm not happy one bit after reading this!
    • boo_star
    • By boo_star 4th Jun 14, 9:27 PM
    • 1,317 Posts
    • 667 Thanks
    boo_star
    Who has been bullying you into getting your score?

    It seems rather odd to be honest since lenders don't give a fig about external scoring mechanisms.
    • superboobs
    • By superboobs 4th Jun 14, 10:23 PM
    • 52 Posts
    • 41 Thanks
    superboobs
    The Right to buy Co-operative, they give advice on buying your Council/housing association property, find you a mortgage etc. Maybe bullying is a bit strong a word, but for the last few weeks I've been asked again and again for our credit score, which you can only get by signing up for something we don't want, I've argued that our credit reports are excellent which they are, so why do we have to have a score, just to be told 'that's what companies want' the score not the report!
  • cheops2006
    I would have thought that if the Co-op wanted your score they would be able to get it themselves rather than asking you.
    -== CREDIT BUILD IN PROCESS 30% COMPLETE ==-
    Overdraft - £0 Used/£500 Limit
    Vanquis Card - £1000 Limit
    Aqua Card - £1200 Limit
    Barclaycard Platinum - £2500 Limit

    Credit Utilisation 11%/Savings - £1800
    • pukkamum
    • By pukkamum 9th Jun 14, 2:00 PM
    • 3,777 Posts
    • 9,159 Thanks
    pukkamum
    on my credit report my only 'negative' is having no settled accounts, but they say a catalogue settled account doesn't count, so what on earth can i settle in order to remove this negative? I have a redundant RBS account, should i close that? Would that count as settled?
    I don't get nearly enough credit for not being a violent psychopath.
    • pukkamum
    • By pukkamum 9th Jun 14, 2:04 PM
    • 3,777 Posts
    • 9,159 Thanks
    pukkamum
    p.s it says I have no successfully settled accounts, not sure what it wants
    I don't get nearly enough credit for not being a violent psychopath.
    • d70cw6
    • By d70cw6 9th Jun 14, 2:10 PM
    • 744 Posts
    • 485 Thanks
    d70cw6
    The Right to buy Co-operative, they give advice on buying your Council/housing association property, find you a mortgage etc. Maybe bullying is a bit strong a word, but for the last few weeks I've been asked again and again for our credit score, which you can only get by signing up for something we don't want, I've argued that our credit reports are excellent which they are, so why do we have to have a score, just to be told 'that's what companies want' the score not the report!
    Originally posted by superboobs
    why not just tell them "it's 100%" if that's what they're after?
    • The Boss
    • By The Boss 15th Jun 14, 10:52 AM
    • 5,706 Posts
    • 3,771 Thanks
    The Boss
    Back to the top...
    You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

    Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.
    • The Boss
    • By The Boss 17th Jun 14, 1:08 PM
    • 5,706 Posts
    • 3,771 Thanks
    The Boss
    Back to the top (again)
    You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

    Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.
  • james.maperson
    on my credit report my only 'negative' is having no settled accounts, but they say a catalogue settled account doesn't count, so what on earth can i settle in order to remove this negative? I have a redundant RBS account, should i close that? Would that count as settled?
    Originally posted by pukkamum
    Lenders like to see settled accounts - it shows that you can open, maintain a credit agreement well, and then close it. It shows a history of a good credit relationship, and you are more likely to do that with them (then say, default). In line with the rest of the advice on this post, remember that the CRA score is not seen by a lender, so don't let the tail wag the dog; do not make a personal financial change simply to move the indicative score given by a CRA. If you aren't using the RBS account, then close it, but it's not a biggie - you may find that in their own scores, many lenders will view a closed mail order as a settled account.
    • The Boss
    • By The Boss 24th Jun 14, 4:13 PM
    • 5,706 Posts
    • 3,771 Thanks
    The Boss
    Back to the top (again)
    You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

    Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.
    • The Boss
    • By The Boss 25th Jun 14, 5:30 PM
    • 5,706 Posts
    • 3,771 Thanks
    The Boss
    Back to the top (again)
    You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

    Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,220Posts Today

6,797Users online

Martin's Twitter