Is 600 a good Credit Score?

The scale of the UK’s lending industry is vast. To give you a flavour, In May 2022, 44 million UK adults (83% of the total population) used some form of credit or loan product1 and approximately 60,000 mortgages are approved each month.

As a result, lenders have to make 14 loan approval decisions every second of the day to keep up and therefore use data to work out who to accept or reject.

And that’s where credit scoring comes in. It is the way that lenders cope with the millions of applications that are made to them every year both for credit cards and mortgages, but also mobile phone contracts, car leasing agreements and much more.

Lenders use various credit scoring models to evaluate creditworthiness, which can lead to differences in credit scores depending on the model used.

For anyone who wants to improve their credit score give themselves the best chance in the credit game, here’s our ultimate guide to how they work.

1. What is a credit score?

2. How is a credit score created?

3. What is the average credit score in the UK?

4. When do you get one?

5. Why is it important to have a high or good credit score?

6. Who invented credit scores?

7. Who creates a credit score?

8. Where is a credit score kept?

9. How do you find out what it is?

10. Is 600 a good credit score?

11. What is a good score for ClearScore?

12. What is an acceptable credit score?

13. How to repair a ‘thin’ or poor credit score

14. How do you make a credit score higher?

15. Are credit scores regulated?

1. What is a credit score?

It’s a number everyone over the UK over the age of 18 is given to indicate their credit worthiness. Each lender uses a different method to calculate their own credit scores, but all of them use information from the three main Credit Reference Agencies (CRAs) to work them out - these are Experian, Equifax and TransUnion.

Maintaining positive credit accounts, such as timely payments and low credit utilisation, is crucial for a good credit score.

There are also several subscription services which will reveal, sometimes for free and sometimes for a fee - what a person’s credit score is. A well known free service is ClearScore which uses Equifax data to provide the credit score.

Read why you should always check your credit score

2. How is a credit score created?

No one really knows. Neither lenders nor CRAs let on about how they calculate credit scores, but there are several key information sources they use. These include whether someone:

• Is maxing out their credit card or loan facility.

• Is not paying their credit card or loan payments on time. Payment history is crucial as it accounts for up to 35% of the credit Score.

• Has a long or short credit history track record.

• Has taken out different types of loans. Variety is good.

• Is applying for credit too often.

• Has lived at their home address for a long time.

• Is not exceeding credit card limits. Exceeding the credit limit can negatively impact the credit score.

• Has been on the Electoral Role for a while.

Read how your credit score is REALLY calculated

3. What is an 'acceptable' credit score?

Different credit score agencies use different scoring systems. If your score is between 55% and 67% of the maximum you can attain, then you’re doing well. So take Equifax - it has now has a maximum score of 1000 (it used to be 700). A score between 531 - 670 is considered 'good' by them, and 671 - 810 as 'very good'. Anything above 810 is classed as ‘excellent’.

A score between 721-800 is categorised as 'fair' by Experian. Having fair credit scores can impact your ability to secure loans with favourable terms. However, you can improve your score by using tools such as secured credit cards and credit-builder loans.

The table below shows you how difference scores are rated by difference CRAs.

4. When do you get one?

At 18 years old in the UK anyone can apply for a loan, mortgage, credit card or any other type of credit agreement but before that age, their application will be turned down. This is not because it is illegal, but instead because no credit agreement between a lender and someone under 18 can be legally enforced.

After someone turns 18, lenders and CRAs will start adding points to your score once you begin to establish a borrowing history.

5. Why is it important to have a high or good credit score?

A good credit score has two advantages. One is that you’re more likely to get a mortgage and less likely to be turned down for a credit card or mobile phone contract. The other is that when someone does get lent money then the better their score, the lower the interest rate paid will be.

A higher credit score can lead to more favourable credit options and lower interest rates, as it reduces perceived risk for lenders.

Read about the six factors that affect your credit score

6. Who invented credit scores?

Credit scores were developed during the 1950s and the initial idea came from US citizens engineer Bill Fair and mathematician Earl Isaac as a way to standardise how people are lent money.

7. Who creates a credit score?

Lenders and CRAs both use automated software that takes details from your credit file - which is the raw data about your financial past held by them - and uses it to crunch a score. Humans only input into someone's score directly when the information on a person's file turns out to be wrong or inaccurate and needs updating.

Read: the Six myths about credit scores

Read about the six factors that determine your credit score

8. Where is a credit score kept in a credit report?

Nowhere, really. A score is just the number created by the lender or credit agency's software, based on the information kept within its databases.

9. How do you find out what it is?

Lenders are cagey about what score they give you, but the CRAs are keener to let everyone know, sometimes for free and sometimes for a fee. Here’s where to look:

ClearScore.com - free

Equifax - free trial for 30 days

Experian - free

Checkmyfile - free for 30 days.

Read up on how to check your credit score

10. Is 600 a good credit score?

Many people ask this question, but it’s taking your down a blind alley. The three main credit reference agencies in the UK, Experian, Equifax and TransUnion, use different counting systems. So a 600 score for Equifax would be classed as ‘good’ (Equifax score out of 1000). On the other hand an Experian (they score out of 999) see 600 as ‘Poor’ and on TransUnion (the maximum score for them is 710) it is seen as ‘Fair’!

Individuals with a 600 credit score may face challenges in securing loans, as some lenders may decline their credit applications. A 600 credit score is considered a fair credit score, which means individuals may face higher interest rates and lower credit limits. However, by demonstrating timely payments and financial stability, they can improve their scores.

11. What is a good credit score for ClearScore?

ClearScore is a website that also gives you a score, but it's not an official credit agency. It uses the Equifax credit score and currently has a maximum score of 700.

12. What is the average score UK?

Experian says its national average is 759 out of 999. Equifax was 380 out of 700 so under the new scoring this is about 450 out of a 1000.

13. How to repair a ‘thin’ or poor credit score

This will sound like reverse logic. People who don’t borrow much, don’t have credit cards and rent instead of having a mortgage are less likely to be given loans.

These people are said to have ‘thin’ credit scores because lenders don’t have much info on them - and therefore find it difficult to make a lending decision.

One solution to this conundrum is to start adding your rental payments to your credit score using a service like CreditLadder, or to take out a ‘credit repair’ credit card but beware - the interest they charge if you don’t pay your balance off each month can be high. Additionally, a secured credit card can help improve credit scores by requiring a security deposit and reporting payment activities to credit bureaus.

Find out how about credit building through rent

Find out more about thing credit scores

14. How do you make a credit score higher?

The simple answer is to borrow money and then pay it back, on time. There aren’t any shortcuts, though that would be nice, and you can’t pay to improve your credit score, as some people are led to believe. Late or missed payments can severely harm credit scores.

Here are some of the guides we’ve already published to give you some ideas to improve your credit score:

How to improve your credit score

Five ideas to improve your credit score

5 Easy ways to improve your credit score

Don't forget if you want to improve your credit position by reporting your rent payments, CreditLadder is the only way to improve your credit score and position across all four of the main Credit Reference Agencies in the UK, namely Experian, Equifax, TransUnion and Crediva.

You can also use CreditLadder's free mortgage application service which will tell you how much you could borrow.

15. Are credit scores regulated?

Credit references agencies are licensed and therefore policed by the Financial Conduct Authority.

If someone applies for a loan or credit card and they are turned down, then they can ask the lender to say which credit reference agency it used to base its decision on. They can request a free copy of their credit report, the agencies must then send them a copy of their credit file and, if there are any inaccuracies, amend their file within 28 days of receiving your letter to them.

Source:

1. https://www.money.co.uk/credit-cards/credit-card-statistics

2. https://tradingeconomics.com/united-kingdom/mortgage-approvals.

CreditLadder can help you improve your credit score

If you want to improve your credit position by reporting your rent payments, CreditLadder is the only way to improve your credit score and position across all four of the main Credit Reference Agencies in the UK, namely Experian, Equifax, TransUnion and Crediva. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money.

CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.

Remember the information provided in this article is for information purposes only and should not be considered as advice.