What does your credit score really
Lenders look at your credit score or credit rating, which
appears in your credit report, to work out if they should lend you
money or give you credit. Here we explain how your credit score
works and what you can do to improve it.
What is a credit score?
Your credit score is a number based on an analysis of your
credit file, at a particular point in time, that helps a lender
determine your credit worthiness. It is used by credit providers,
such as banks and credit unions, to help them decide whether to
lend you money, how much they will lend you and may sometimes
influence what interest rate is offered to you.
Comprehensive credit reporting and how it's changing your
From February 2018, some banks will be putting additional
information about the credit products you hold on your credit
report which will give a more complete picture of your credit
However, these banks are only required to add this new
information to your report from July 2018.
The new information will include:
- the type of credit products you have held in the last 2
- your usual repayment amount
- how often you make your repayments and if you make them by the
You may find that your credit score has changed as a result. See
how to get a good credit score for
tips on improving your score.
How is your credit score calculated?
Credit reporting agencies collect your financial and personal
information and document it on your credit report. This information is then
used to calculate your credit score, which includes:
- Your personal details (such as age and where you live)
- The type of credit providers you have used (e.g. bank or
- The amount of credit you have borrowed
- The number of credit applications and enquiries you have
- Any unpaid or overdue loans or credit
- Any debt agreements or personal insolvency agreements relating
What does my credit rating mean?
Depending on the credit reporting agency used to calculate your
score, it will be a number between zero and 1,200 or zero and
The number is rated on a five-point scale (excellent, very good,
good, average and below average). The position of your credit score
on this scale helps lenders work out how risky it is for them to
lend to you:
- Excellent - you are highly unlikely to have
any adverse events harming your credit score in the next 12
- Very good - you are unlikely to have an
adverse event in the next 12 months
- Good - you are less likely to experience an
adverse event on your credit report in the next year
- Average - you are likely to experience an
adverse event in the next year
- Below average - you are more likely to have an
adverse event being listed on your credit report in the next
How to find out your credit score
You can get a free credit score from a number of online
providers. The results may vary depending on which credit reporting
agency is used. The following websites offer a free credit
You may need to check with more than one credit score provider
to get a consistent and reliable measure of your credit rating.
Your credit score is dynamic, meaning it may change from month
to month as your financial circumstances change.
Protecting your personal information
By obtaining your free credit score you may be agreeing to allow
your personal information to be disclosed to third parties for
marketing purposes. Ensure you read all terms and conditions and
consider whether you want your personal information passed on for
marketing purposes. You can opt out or unsubscribe where you do not
want these details passed on.
Checking your credit rating can protect you from
You should check your credit rating and report to ensure your
information is correct and that all the enquiries and listings on
the report have been made by you. Criminals can steal your identity
and take out credit in your name so checking the accuracy of your
credit report is important. See credit reports for more information on
how to check your credit history.
Case study: Jessica gets her credit rating
Jessica wanted to be able to negotiate a better deal on her
loans and credit card so she decided to find out her credit score.
She found two providers offering a free credit rating online. She
decided to compare the two and see how she rated with both.
The first website placed Jessica in the 'very good' category
with a score of 726 out of 1000. The second website placed her in
the 'good' category with a score of 699 out of 1200.
Jessica did some further research and found that each website
used data from a different credit reporting agency to calculate her
credit score. She requested a copy of her credit report from each
of these agencies to see what the difference was.
It turned out not all her credit history was listed with the
reporting agency the first website used so her score came out
higher. The scoring system was also different across both
Jessica decided to keep an eye on her credit rating in future to
ensure it stayed high.
How to get
a good credit score
Your credit score can increase or decrease over time depending
on the information contained in your credit report. Your score can
change even if your financial habits haven't. This could be due to
a number of factors including:
- Applying for a new loan or credit card
- A listing on your credit report expiring
- A change to your credit limit on an existing loan or credit
- New information from a creditor
- Closing a loan or credit card account
- Late repayments
Improving your credit rating starts with looking at your current
financial situation and looking for ways to improve it. As your
financial circumstances improve your credit rating will improve.
Getting into a good credit position before you next apply for a
loan can help increase the likelihood of you getting approved.
You can improve your credit score by:
- lowering your credit card limits
- consolidating multiple personal loans and/or credit cards
- limiting your credit enquiries
- making your repayments on time
- paying your rent and bills on time
- paying your mortgage and other loans on time
- paying your credit card off in full each month
Credit scores help lenders decide if they should
lend money to you. Knowing your credit score can help you to
negotiate a better deal with your bank or find an alternative
lender that will reward your good credit history.
Last updated: 12 Jun 2018