Credit Score Explained



Credit Score Explained

Before you can begin to build a credit history or rebuild your credit score, it helps to understand how and why your credit report affects your credit applications. This page will look at what a credit score is, how it’s worked out, and how you can find out, in detail, how your credit score may be affecting your ability to obtain credit.


What is a credit score?

A credit score is a figure which lenders use to determine how likely they will be repaid if a person applies for a loan or credit card. Your credit score is based on your credit report, which is a record of how you have managed your credit in the past, including everything from mobile phone contracts to mortgages.


The higher your credit score, the more likely you will be accepted for credit and receive better rates of interest.


It's important to understand that you don't have a single credit score – each lender calculates theirs differently, accounting for the way they do business and what they are looking for in potential customers. For instance, even if your credit history has stopped a mainstream lender from offering you credit, a specialist lender might still consider you – though normally at a higher rate of interest.


How is my credit score calculated?

When you apply for credit, the company you're applying to will check your credit reference file (also known as credit history) with one of the three main credit reference agencies – Equifax, Experian, and TransUnion. These agencies share information with building societies, banks, and retailers to build a picture of how "creditworthy" someone is – how likely they are to repay money that is lent to them.


Each lender will use the information held by one of these agencies alongside its own system to calculate your credit score. This is usually based on a combination of your credit history, your application, and any other information they already have about you, including:


  • Employment status – some lenders might penalise your score more heavily if you don't have a full-time job.
  • The type of credit you are applying for – applications for a credit card will be scored differently to an application for a loan. And your rating might be more favourable if you’re applying for a secured loan, as your property is used as security against any defaults on payment.
  • The amount of credit you currently have – already having a number of credit lines, such as overdrafts, loans and credit cards, this can affect your score. If you’re close to the credit limit on these credit lines, you’ll also be marked down.
  • The number of applications you have made – each time you apply for credit, or when an employer, insurer or landlord checks your credit history, this is recorded on your credit file. You may be marked down if you have lots of enquiries over a short period of time as this can lead lenders to believe that you’re desperate for credit, or struggling with bill payments.

A high (good) credit score means you'll qualify for better products, which usually means credit at a lower rate of interest or with added perks, such as a long 0% balance transfer period. A low credit score means you might have to pay more for your credit, or you might not be able to borrow at all if the lender considers you too much of a risk.


Put simply, there's no easy way to tell what credit score a lender will give you – and most won't tell you your score even if you ask. However, you can always check your credit history, which may give you an indication of your likelihood of acceptance before applying.


What is a credit check?

A credit check is when a company or individual, such as landlords, employers, and lenders, look at the information held on your credit report to understand your financial behaviour. Also known as a credit search, this information is used to get an idea of how you manage your money and whether you pay back your credit on time. It also checks the credit history of anyone you may have any financial associations with, such as a partner you share a bank account with.


There are two types of credit check:

  • Hard credit check - when you make an application for credit, this is recorded on your credit report as a ‘hard check’, meaning any company searching it will be able to see that you’ve applied for credit. Too many hard checks in a short period of time can affect your credit score, which may ultimately affect your chances of getting approved.
  • Soft credit check - these credit checks don’t leave any trace on your credit report, and are usually carried out by employers or lenders who offer an eligibility check for an instant initial decision. It’s worth noting that not every lender offers this option, so take care when applying. For more information on ‘soft searches’ please see our FAQs page.


How can I check my credit score?

Checking your own credit report won’t have any impact on your score, or affect your chances of being accepted for credit.


While lenders won't tell you what credit score they gave you, a lender must tell you which credit reference agency they used to calculate it. You can then visit this agency's website and, for a small fee, get a copy of the same information that lenders see when they check your credit reference file.


Why do lenders need your credit history?

A lender’s primary objective when checking your credit history is to determine the risk involved when approving a loan. It’s important to monitor your own credit scores to ensure they remain as high as possible, but your credit scores are just one example used to assess your credit stability.


Checking your file does not hurt your credit history, but too many unsuccessful applications will. If you've been turned down by a lender, it's better to check your file before applying to another one.


For more information on ‘Soft Searches’ please see our FAQs page.


You can view an example of an Experian credit report here. As you can see, the agency should give you helpful information on the positive and negative factors affecting your credit history, as well as the individual score the agency gives you. You might see things like missed payments on bills or credit cards, which will negatively affect your score.


In general, you can use this as a guideline to how lenders will see you and if your credit score is low, take action to improve it before you apply again.


Where can I get a free credit check?

If you don’t want to pay to see your credit score, you could sign up to a free credit-checking service such as ClearScore or Noddle, or take an eligibility check with your lender before you apply.


Vanquis Bank’s Express Check facility can help you find out if you’ll be accepted for one of our cards. To find out more, check out our Express Check for Credit Cards page.

What is considered a good credit score?

There's no 'magic' number when it comes to your credit score, and each lender will look for different things in potential customers – while you may be one lender's target market, you may find you’re rejected by others.


The three main credit reference agencies use their own scoring system, as outlined below, so there is no one single figure that represents a ‘good’ or ‘bad’ credit score.

What is the credit score range for Equifax?

Credit score range Credit score band
0 - 279 Very Poor
280 - 379 Poor
380 - 419 Fair
420 - 465 Good
446 - 700 Excellent

Correct as of 09/08/2019 / Source:

What is the credit score range for Experian?

Credit score range Credit score band
0 - 560 Very Poor
561 - 720 Poor
721 - 880 Fair
881 - 960 Good
961 - 999 Excellent

Correct as of 09/08/2019 / Source:

What is the credit score range for TransUnion?

Credit score range Credit score band
Rating 1 (0 - 550) Very Poor
Rating 2 (551 - 565) Poor
Rating 3 (556 - 603) Fair
Rating 4 (604 - 627) Good
Rating 5 (628 - 710) Excellent

Correct as of 09/08/2019 / Source:

What could harm your credit score?

Although each credit agency and lender has its own criteria, there are a number of common factors that can affect your credit score:

  • Payment history – this is the single most important factor when it comes to credit scoring, and even one missed payment can harm your score. Ultimately, before lenders agree to take you on as a customer, they need to be confident that you will pay back your debt on time. If you have a history of late or missed payments, this can have a negative impact on your score, with each missed payment hanging around on your report.
  • The type of credit you are applying for – applications for a credit card will be scored differently to an application for a loan. And your rating might be more favourable if you’re applying for a secured loan, as your property is used as security against any defaults on payment.
  • Your current credit mix – those with top credit scores usually have a good mix of credit lines, including overdrafts, mobile phone contracts, credit cards and mortgages. Successfully managing a diverse range of credit lines shows that you are good with money and can handle credit responsibly.
  • Your available credit – having several different lines of credit is always a positive with lenders unless you are close to the limit on all of them, as this suggests that you have become reliant on borrowing. Paying your credit card balance in full at the end of each month will help you avoid interest charges.
  • Too many hard credit searches – getting turned down for credit is always frustrating, but if you are rejected, resist the temptation to keep applying to different lenders. Multiple applications mean multiple hard searches on your credit file, and too many in a short space of time can put a big dent in your credit score.
  • Negative information – late or missed payments, county court judgements (CCJs), debt relief orders (DROs), individual voluntary arrangements (IVAs) or bankruptcy are all examples of negative information that can appear in your credit file. While a missed payment will stay on your report for six months, things like CCJs and IVAs can have an impact for six years after they have been repaid, although you can lessen the impact over time by managing your money correctly.

Helpful Information:

If you want to find out more about your credit score or your borrowing options, here is some useful information from Vanquis Bank.


Credit Score Myths

Unfortunately, there are some myths out there that can hinder your efforts to rebuild your credit score. Our credit score myths page takes a look at some of the most popular myths and gives you the truth.


How to Improve Your Credit Rating

One of the most popular credit score myths is that there are quick fixes available that can make your score soar. Sadly, this isn’t the case and it takes a combination of perseverance, good financial management and using the right products to get back on track. Check out our page on improving your credit score for more information.


Secured vs. Unsecured Cards

Most credit cards are unsecured, which means you can borrow on them without putting down a deposit or your possessions as a guarantee that you’ll repay the debt. There are other options available though. Although rare, secured credit cards are available, and they don't usually require a credit check.


Instead, you’ll usually be asked to put down a cash deposit which acts as security against your borrowing. If you miss payments, the lender will be able to take all or some of the deposit to repay what you owe them. For more information, check out our Secured vs. Unsecured Cards page.


Express Check

If you want to check your eligibility for a credit card before you apply, our Express Check gives you an instant decision on whether you’ll be accepted. Our Express Check tool leaves no trace on your credit report, and there's no obligation to go on to make a full application for a Vanquis Credit Card, unless you want to.


To find out more, and check your eligibility, go to our Credit Cards Express Check page.