Your credit score is an important part of your financial health, and affects your ability to get a mortgage and other loans. But what exactly is a bad credit score? How does this work if we consider that different credit agencies have their own scales and calculations?
Let’s find out.
What does a bad credit score look like?
Major credit agencies like Experian, Equifax, and TransUnion (the main three in the UK) each have their own scoring systems. That being said, regardless of the agency, the rule is the same. The lower your score, the worse your financial standing is. Here’s how each one scores their credit ratings:
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Experian: 0-999, with good being above 8811 and anything lower than 5602 being very poor
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Equifax: 0-1000, with good being above 670 and anything below 579 classed as very poor3
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TransUnion: 0-850, with good being above 721 and bad below 6004
Remember that most agencies will allocate you a ‘fair’ score if you’re above the low end but not yet in ‘good’ territory. Some have ratings above good, like Equifax, which offers an excellent score for anything above 800.
Which credit agency do lenders use?
There may be some lenders that only use one credit agency, but as shown above, they can vary quite significantly. Because of these differences, many lenders will use a tool like Checkmyfile, which gives data from the top three UK agencies and a more consistent overview of a person’s credit score and history.
What causes a bad credit score?
There can be several reasons as to why your credit score may be low. However, the most common factors that can influence your score involve your borrowing history, credit applications, arrears, missed, late, or default payments, and not being registered on the electoral roll.
To work out why your credit score is low, you’ll need to narrow down these fields and work to improve those specific areas.
For advice on improving your credit score, check out our article below:
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
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