What kind of lending risk are you? If you are looking to borrow money it is important to know.
Your credit score is what potential lenders will use to determine whether or not they are willing to lend you money, how much they are willing to lend and at what rate of interest. You could be applying for a mortgage, credit card or personal loan, it doesn’t matter – your credit score will still have a part to play in whether or not you can go ahead and borrow the amount you want at a reasonable rate of interest. So, how do you know whether you have a good credit score or not?
The obvious first step is to check your credit score and for that you have a number of options. There are plenty of ways to get a free credit report so don’t feel that you have to pay or sign up for some kind of deal to do it. Companies such as Experian and Equifax provide instant access to your credit score, as well as information on your broader credit history (your credit report).
Some companies will ask for a credit card even though they claim that it’s free to check your score, but others won’t. ClearScore, for example, doesn’t take credit card details at all. Look out for those agencies that will claim it’s free to check your credit score, but take your credit card details and then start quietly charging you a monthly or annual fee after 30 days. They may try and convince you this will provide additional information and notifications that could benefit you but they often are not necessary.
Different provider, different scale
What’s annoying about individual credit scores is that they differ depending on which credit agency you get yours from so it is hard to compare like for like. It would be far easier for the average consumer if there was a standard measure of credit score then we could all more easily understand what our credit score indicated to potential lenders – but alas, that is not the case. The most common ranges are shown below (these are estimates as they can change):
- FICO Score range: 300-850
- VantageScore 3.0 range: 300–850
- VantageScore scale (versions 1.0 and 2.0): 501–990
- Experian’s PLUS Score: 330-830
- TransUnion New Account Score 2.0: 300-850
- Equifax Credit Score: 280–850
So, as you can see it is entirely possible to have a different credit score, depending on the credit agency you are looking at and the credit agency or agencies that lenders might use to check out your credit history. Sometimes, then, it is worth asking what credit reference agencies a particular leder uses before you apply for that loan.
What counts as a good credit score?
Numbers-wise it’s difficult to say given the range of scales that can be assigned to a single individual. However, for the two largest credit reference agencies this is a basic guide:
961-999 = Excellent
881-960 = Good
721-880 = Fair
561-720 = Poor
0-560 = Very Poor
467 (and above) = Excellent
420-466 = Good
367- 419 = Okay
279 – 366 = Poor
0-278 = Very Poor
It’s worth bearing in mind that even if you fall into a rather dispiriting category like “very poor” that it’s not the last straw and that you will have no hope of borrowing any money. Lenders will use your credit score as a guide but there are other factors they will take into account too – such as the assets you have (e.g. a property) and any security you can provide (e.g. a guarantor or even a car).
What if you don’t have a good credit score?
Remember it’s not the end of the world, there are other options too that you could consider. For example:
- Bad credit loans – loans that provide a range of lending options if you don’t have a good credit score.
- Guarantor loans – a friend or family member backs you up so the lender is more willing to lend and at a lower rate of interest.
- No credit check loans – for short term borrowing these are ideal. Less focus on credit score, as long as you can provide evidence of income.