Your credit score is a vital cornerstone of your personal finance, with a bad score potentially being the difference between being accepted for a personal loan and not. The rejection of your application can, of course, be a major impediment on your independent financial plans, which means your credit report is one of the most important documents you’ll ever read – so it’s key that you understand it properly.

What’s the difference between a credit report and credit score?

Though these terms are often used interchangeably due to the fact that they both relate to your credit history, there is in fact a difference between the two.

What is a credit report?

Your credit report is a compilation of financial information that is held against your name – think of it like a CV for your credit history. Compiled by credit reference agencies, your credit report will typically include a list of your personal information (date of birth, address history etc.), as well as detailing your credit accounts, such as bank and debit accounts, outstanding loan agreements and any utility company debt.

It’ll also include details of anyone you’re financially linked to (such as your spouse), any public record information (such as County Court Judgements), home repossessions, IVAs and bankruptcies.

What is a credit score?

Your credit score is, in essence, an overall grade for your credit history. Its purpose is to give you a clear idea of how favourable you are to lenders and how likely you are to be accepted for credit as a result. This is presented to you in a numerical value of 0-1000.

What is a good credit score?

In short, the higher your credit score, the better. This is because a higher credit score indicates to lenders that you’re more reliable and, subsequently, more ‘creditworthy’.

It’s important to note that there is no universal credit score in the UK, meaning you’ll have a different score depending on the agency completing the check. There are currently three companies in the UK that offer a credit score check – Experian, Equifax and Callcredit (which trades under the brand name TransUnion). These companies have a statutory obligation to provide a free credit report, and also offer a more comprehensive service – but the free version is normally all you’ll need to get a good idea of your financial standing.

These different lenders and credit companies rank your credit score using a wide range of methods. Though the higher your score, the better, this is no guarantee that you’ll be able to borrow money, as every lender has different criteria for accepting a loan application. Think of your credit score as a guide to what kind of loan you should apply for (a bad credit loan, a guarantor loan, or a secured loan are just some examples), rather than a hard-and-fast condemnation of your financial situation.

For an idea of what constitutes a good credit score, let’s take a look at Experian as an example – their credit scores can be broken down into parameters, which are listed below:

  • Excellent: 961-999
  • Good: 881-960
  • Fair: 721-880
  • Poor: 561-720
  • Very poor: 0-560

Don’t fret if your credit score is too low, as there’s plenty of ways to build it back up – all based upon sound financial management and a good level of credit card discipline. You can read our blog on cleaning up bad credit for some actionable tips, but the bottom line is fairly simple – you need to appear trustworthy and financially solvent in the eyes of lenders.

How to check your credit score

As aforementioned, all CRAs (credit reference agencies) have a statutory obligation to provide you with a free copy of your credit report, so checking your credit score and accessing your credit report is as easy as applying through any of these companies, either online or by requesting a written copy.

That being said, more comprehensive credit reports will often incur a charge. A free 30 day trial including access to a full credit report is available with both Experian and Equifax, although it’s important to note that both sites request payment details when first signing up – meaning you’ll be charged if you forget to cancel in time.

Does checking your credit score affect your credit report?

Enquiring into your own credit status counts as a ‘soft enquiry’ and is therefore not added to your credit report. The only time a credit check is added to your report is if a lender has actioned the check as part of your application for a financial product. Your score will be lower if you apply for various financial products all at once – so it’s best to go forward with a ‘soft enquiry first, and then shop around for your ideal loan. Be sure to make it clear to lenders and checkers that this is the case by requesting a quotation – this way, any enquiry is sure not to leave any type of footprint on your file.

When should you check your credit report?

Checking your credit score and cross referencing this against your credit report is always a good idea before applying for any type of loan to ensure you have a clear comprehension of your likelihood of being accepted.

It’s important to check in on your credit report from time to time regardless, however, to ensure there are no mistakes or unnoticed missed payments that could affect you further down the line.

All information correct at the time of publication.

The Jolly Good Loans blog is full of helpful financial tips and advice, and remember, if you’re having financial difficulty, there is help available. Head over to the Citizens Advice website or call the free national debt helpline on 0808 808 4000.