Your credit score is the magic number that helps lenders decide whether or not to approve a mortgage, loan or credit card application. Typically, the higher the number, the better your borrowing prospects. But a shake-up of the scoring system at TransUnion, one of the UK’s three main credit reference agencies, could mean a shock next time you log in.
Previously, TransUnion’s top score was 710, but later this month it will start rolling out a wider range, rating you out of 999. And while the change means tens of thousands of people will be promoted to a higher band (bands are colour-coded like traffic lights, with “excellent” at the top and “very low” at the bottom), others will be demoted and find they have slipped down a rung. The good news, though, is that even if your “score banding” changes, the underlying information held on your credit file will remain the same, and that is what lenders use to decide the outcome of an application – so credit decisions and approvals will not be affected, says the company.
In the UK there is no “universal credit score” that is used by lenders or credit reference agencies (CRAs). Each CRA has its own system: the other two main ones in the UK are Equifax and Experian. At Equifax your credit score is between 0 and 1,000, and at Experian it’s 0 to 1,250.
It is a number calculated based on your credit history. That is, it’s a measure of how likely you are to repay your debts on time. Before you can take on any kind of debt – and for other purposes, too – banks, mobile phone companies and other businesses will check your creditworthiness with any of the three CRAs.
They all use slightly different models, but rely on similar data, such as your history of paying bills, to calculate the score. Those in the top bands are considered a more reliable prospect for lenders, with your score also affecting how much you can borrow and the rate of interest charged. Previously, its top mark was 710, but this month it will start rolling out the new system that scores you from 0 to 999.
TransUnion says the overhaul gives consumers a “clearer and more detailed view of their credit health”. It claims it is “more than a new number range” as it combines how consumers use credit over time, with a “moment-in-time view to provide a more considered picture of how consumers manage credit day-to-day”. The new score draws on more data, including how account balances have changed over time, and how credit cards are used.
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