What is Credit Score?

Full Definition

A credit score is a number, calculated by a credit reference agency using information held in an individual's credit file, intended to summarise how creditworthy -- how likely to repay borrowing reliably -- that person appears based on their financial history. In the UK the three main credit reference agencies are Experian, Equifax and TransUnion, and each uses its own scoring scale and methodology, so the same person can have quite different-looking scores from each agency; lenders also generally apply their own internal scoring models on top of, or instead of, the raw agency score when actually deciding whether to approve an application, meaning no single published score is a definitive predictor of whether any particular lender will approve credit. Factors that typically influence a credit score include payment history (missed or late payments, defaults and County Court Judgments weigh heavily and stay on file for six years), how much of available credit is currently being used (credit utilisation), the length and stability of credit history, whether someone is registered on the electoral roll at their current address, and the number of recent credit applications (each hard credit check can cause a small, temporary dip). A credit score is not itself visible to lenders in the exact form shown to the consumer through free-to-use score-checking apps and websites -- it is a simplified, consumer-facing summary designed to help people understand roughly where they stand and identify ways to improve their position, such as registering to vote, correcting errors on their credit file, paying bills on time, and keeping credit utilisation low, rather than a number lenders themselves see or use directly.

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