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Credit reference agencies are independent organisations that hold data about your creditworthiness. They will give you a score based on your financial history on how trustworthy you are when repaying what you owe. These agencies do not decide whether to approve your credit application, they just provide the information to the lender who makes the decision. The lender can use any one of these agencies, or they can use a combination of agencies in combination with other factors such as age and salary.

When you apply for a loan (e.g., mortgage, car finance, credit card, or mobile phone contract) the lender checks your credit history with the credit reference agencies. In the UK there are 3 different referencing agencies: Equifax, and Experian, TransUnion. Your score for each of the agencies may be different due to the differences in how each agency calculated your score.

Equifax

Equifax score ranges between 0 to 700. The higher the score, the lower risk you are perceived to be by lenders. Therefore, you are more likely to be approved for higher loans with lower interest rates.

Experian

Experian’s score ranges from 0 to 999. Just like with Equifax, the higher the score the more lenders are willing to lend to you and at lower interest rates. Experian also has Experian boost where you can link your bank account which may increase your credit score.

TransUnion

TransUnion scores range from 0 to 710. Similar to both Equifax and Experian, the higher you score, the better.

What affects your score?

The score is calculated based on your financial history and other factors such as your registration on the electoral roll. The main factors affecting your score are:

· Payment history – missing payments can negatively affect your score.

· How much you currently owe – using under 30% of your total credit limit is seen as positive.

· Length of credit history – the longer you’ve built up your credit history, the better it looks to lenders.

· New accounts – how many new credit accounts have you recently opened?

· Past hard credit checks – if there are too many hard checks on your record, lenders may be wary.

· Any county court judgements (CCJs) issued against you will negatively impact your score.

· The type of credit accounts you have because having a mix of accounts can help your score.

How can you improve your score?

· Registering on the electoral roll at a fixed address.

· Not missing any payments.

· Avoid CCJs being filed against you or filing for bankruptcy

· Make sure you keep your credit utilisation low.

· Avoid opening many accounts in a short period.

· Avoid applying for a lot of loans and products needed a hard check within a short period.

· Keep building your credit history for an extended period.

· Close any unused credit accounts.

· Avoid frequently withdrawing cash from credit cards.

· Avoid creating a joint account with someone with a bad credit record.

· Avoid being a guarantor for someone who you are not certain will make their payments.

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