Before applying for any form of credit, it’s a good idea to familiarise yourself with your credit report and credit score. Although they sound similar, your credit score and credit report are 2 different things, but they work together to give lenders a clear idea of your financial health.
Having a high credit score and a healthy credit report can increase your chances of getting accepted for credit and could help you to secure the most competitive interest rates.
What is a credit score?
Your credit score is a number that indicates how well you have managed credit in the past and how likely you are to get credit again in the future. Generally, the higher your credit score, the more likely you are to get accepted for credit and the better the interest rate you’re likely to secure.
It’s important to understand that no one has 1 single credit score. The 3 credit reference agencies (Experian, Equifax and TransUnion) each produce credit scores of their own, using slightly different formulas to work this out. This means you could have a different credit score with each agency. Some lenders also calculate their own credit scores.
Each company considers different factors when calculating your credit score, and each lender also has its own set of lending criteria. That means that even if 1 lender has turned you down, another could still accept you.
Your credit score can range between 0 and 1,000, depending on the credit reference agency. Each agency might have slightly different levels of what they rate as ‘poor’, ‘fair’, ‘good’ or ‘excellent’. Below is a quick outline of the different credit score ranges each credit reference agency uses:
Experian: 0 – 999
Equifax: 0 – 1,000 (formerly 0 – 700)
TransUnion (formerly Callcredit): 0 – 710
Depending on your score, you’re said to have excellent, good, fair, poor or very poor credit:
Your credit report is a bit like a financial CV. It contains information about your history of paying credit accounts, such as loans, credit cards and mortgages, with most of the information being provided by lenders. That information is then compiled by the 3 credit reference agencies, meaning you’ll have a different report with each one.
A credit report is basically a record of your borrowing history that outlines how well you’ve managed credit in the past. Each of the credit reference agencies might include different information from lenders on your report.
What is the difference between a credit score and a credit report?
Your credit score is a number that gives lenders a quick snapshot of how creditworthy you are. Generally, the higher it is, the more creditworthy you are. Your credit report, on the other hand, is a detailed summary of your credit history, including the type of credit accounts you’ve held in the past and your payment history.
Your credit report enables lenders to assess how much debt you currently have, whether you usually make your repayments on time and whether you tend to overstretch yourself by taking on too much debt. This can help them decide whether they are happy to offer you more credit, how much they are prepared to let you borrow and how much interest you will be charged.
Bear in mind that lenders also look at factors such as your income to help them determine this.
How can you view your credit score and credit report?
You can check your credit report and credit score with all 3 of the credit reference agencies. By law, they must provide you with a copy of your credit report for free.
You can also check your credit report and score for free with Finder in just 2 minutes. All you need to do is sign up to become a member and verify your ID by answering a few questions, and you’ll then have access to your credit score, report and valuable insights.
What information do they show?
Your credit score is a way for lenders to quickly assess how reliable you are with credit. A high score suggests you’ve had no problems repaying debt in the past, so lenders might be happy to let you borrow again. A low score suggests you have been late with repayments or even missed some, which could make lenders more hesitant to offer you credit again.
Your credit report goes into more detail about your borrowing history and typically contains the following information:
Personal information, including your name, date of birth and address, plus address history, as well as whether you’re registered to vote at your current address.
A list of your credit accounts, such as bank accounts with an overdraft, credit card accounts, mortgages, loans, mobile phone bills and utility bills.
Your payment history, showing whether you’ve made credit repayments on time and in full or whether you’ve missed some (which will work against you if you apply for credit again). Late and missed payments stay on your credit report for 6 years.
Credit searches. Each time you apply for credit, a “hard” credit search is carried out and a footprint is left on your credit file for other lenders to see. If you have a lot of hard credit searches in a short time, this can make you look desperate for credit and can prevent lenders from letting you borrow. “Soft” credit searches are carried out when you use an eligibility checker or you check your credit report – however, these are only visible to you and won’t affect your credit score.
Public record information, such as county court judgements, home repossessions, debt relief orders (DROs), Individual Voluntary Arrangements (IVAs) and bankruptcies. These stay on your credit report for at least 6 years.
Who creates them?
Credit reports are created by the 3 credit reference agencies – Equifax, Experian and TransUnion. However, the information in these reports is typically provided by your creditors (or lenders) – the providers you’ve borrowed money from. Not all creditors report to all 3 credit reference agencies. Some only report to 1 or 2. That’s why the information in your reports can vary depending on which agency provides them.
Credit reference agencies also use the information in your credit report to help them calculate your credit score. Each agency has its own specific method of calculating a credit score, and score ranges can vary.
What are they, and what are they used for?
Lenders use your credit report and credit score to help them assess whether they are happy to lend to you. Your credit report and score are also used to help lenders assess how much to let you borrow and the interest rate that will be charged on your borrowing.
Bottom line: why are they important?
Your credit report and score are important because they can affect your eligibility for loans, mortgages, credit cards, overdrafts and car finance.
If your credit report shows you have borrowed responsibly in the past – in other words, you’ve made your repayments on time and not borrowed more than you can afford to pay back – and your credit score is high, this increases your chances of being accepted for credit in the future. What’s more, you’re more likely to qualify for the most competitive interest rates.
On the other hand, if your credit report contains a lot of missed payments or defaults, and your credit score is low, you could struggle to get accepted for credit again – or if you are accepted, you’re likely to pay a much higher interest rate.
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Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio
Learn the facts about loan applications and your credit score plus what you can do to minimise the impact.
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