How do we check our credit score? Why should we? Credit checks, and scores, and credit reference agencies are all a bit confusing.
We clear things up and explain how to find our credit score, how to improve it and what it’s used for.
What is a credit check?
A credit check is how a company (or bank or landlord) finds out our credit score when we apply for a service that requires credit. Our credit score holds information about us. Like how much money we owe banks or credit cards. Or how regular we are at paying bills on time. And how often we move home. This information tells the company, bank or landlord how likely we are to be able to pay for things on time.
Why should I know my own credit score?
It’s good for us to know our credit score if, for example, we’re looking for a new place to live. Almost every landlord runs a credit check on new tenants as part of the referencing process. Or if we are getting a new phone contract. Or buying insurance. Or getting a bank loan. Or switching energy provider.
Basically, everything that we pay for in instalments will usually involve us being credit checked before we can sign up. Knowing our chances of being accepted, means we are less likely to get turned down because of bad credit when we apply for something.
How do I find my own credit score?
There are a few different credit checking agencies out there (credit reference agencies, to give them their proper name). And they all work with slightly different systems. It can get confusing, but all we really need to know is there are three big ones. They are Equifax, Experian and TransUnion (which used to be called CallCredit). All companies use one of these three to run a credit check on us.
Experian gives us a score out of 999.
Equifax gives us a score out of 700.
TransUnion gives us a score out of 710.
Have a look at what are considered good and bad scores on all three in this article.
We might see the names of other companies claiming to be credit checking companies. Companies like Credit Karma and Credit Monitor are legitimate, but they both use TransUnion’s database. The same goes for Clear Score (which uses Equifax) and MSE Credit Club (which uses Experian).
How do I improve my score?
If our score is low and we need to improve it, there are a few steps we can take.
The first is proactive: Pay all bills on time and, if we have any bad debts, pay them off as soon as possible. (Read up on good debt vs bad debt in this article on the money advice service’s website).
For some of us, things might be too tight to pay off a bad debt any time soon. Fortunately, there are other ways of improving our score that don’t involve paying anything off.
- Get on the electoral roll (sign up here)
- Keep address up to date (across all accounts, so on old store cards, catalogues etc.)
- Close all inactive accounts (again on unused store cards, credit cards etc.)
- Don’t allow anyone us to be linked to our credit score (through joint business ventures, shared bills in shared accommodation – e.g. – student houses etc.)
There are a few urban myths floating around about credit scores and checks. One is that a credit blacklist exists, with people’s names on it who will always be turned down for credit. This isn’t true. What is true is that if we have bad credit, we’re unlikely to be accepted for some services, like credit cards. But the important thing is that a credit score can be improved.
Another myth is that comparison sites (read our guide to compassion sites) like moneysupermarket.com or comparethemarket.com run a check on our credit file that leaves a mark. Comparison sites do run a check, but it’s only something called a ‘soft’ check, and is not visible to lenders checking our files. Soft checks don’t impact our credit scores, but ‘hard’ checks do. A hard check is generated when we actually apply for something, like a credit card or new phone contract.