- 1 What Is The Lowest Credit Score Possible?
- 2 How to check your credit score for free in the UK
- 3 Q: How to Tip the Scale of Credit in Your Favor?
What Is The Lowest Credit Score Possible?
If you have bad credit, it’s all too easy to feel like you have the lowest score out there. With over ½ of all credit scores landing well above 650, having bad credit can make it feel like you have the lowest credit score in the world. Believe it or not, even having a 540 or a 510 isn’t as bad as you think it is.
The lowest possible credit score you can have will, however, vary depending on which credit reporting agency you’re talking about. There are multiple credit bureaus, and some have lower possible scores than others. Here’s what you should know about each credit bureau, and the lowest credit score possible on each one.
Equifax: This major credit bureau has a maximum score of 850, and a minimum score of 280.
VantageScore: This credit reporting bureau can be tricky, since different versions will have different credit score ranges. Versions 1 and 2 have a minimum score of 501, while the more recent 3.0 version has a minimum score of 300.
TransRisk: TransRisk has one of the largest credit score ranges in the entire industry. It has a maximum score of 900, but can allow you to sink as low as a score of 100. TransRisk is most commonly used for insurance and loan purposes.
FICO: FICO is the most well-known credit reporting bureau, and is also known for having a rock-bottom score of 300.
PLUS Score: This relatively new credit bureau has a maximum credit score of 830, but holds a minimum of 330.
If you have already looked at your credit score, you probably would have noticed that it’s not the lowest that it could be. In fact, it is often virtually impossible to have the lowest possible score on any of the credit score ranges. That doesn’t mean, though, that a low credit score won’t hurt you.
A common lender’s rule of thumb is that a person who has a credit score below 550 will almost always be rejected for loans, mortgages, and even apartment applications. A bad credit score, especially one that dips below 600, will end up harming you in more ways than you could imagine. It can even bar you from getting a professional license, going back to school, or keeping a job. In other words, while your credit score isn’t necessarily the worst out there, you definitely have good reason to want to improve your credit score.
The good news is that most bad credit scores are still in the 500’s, which means that it won’t usually take too much work to lift them back up to a reasonable score. So, while you do have bad credit today, that doesn’t mean that you won’t be able to have good credit within a year.
In many cases, the best way to tackle bad credit is all about timing. Once you have gotten control of certain debts, or in some cases, while you’re working at debt relief, it’s time to look at your credit score. With a little hard work, you’ll be able to enjoy the perks of good credit sooner rather than later.
How to check your credit score for free in the UK
T imes are tough. Millions are unemployed. House prices are wobbling, and bankers don’t dare lend money due to the risk that customers will lose even more of it than the banks have managed to lose for themselves.
In this climate, it’s more important than ever to know your credit score (also known as your credit rating) before you apply for a mortgage or a loan.
The days of banks literally mailing you blank cheques to encourage you to sign up for credit cards are gone. Nowadays you need to check your credit score, and if necessary try to repair your credit record before you apply.
Know that in most cases, a company searching your credit file will leave a note that it did so. Too many credit searches – perhaps due to companies checking your record and then rejecting you – will only make a bad credit score worse.
Avoid this spiral by knowing how to get a good credit score in advance.
There are three main credit reference agencies in the UK: Experian, Equifax, and Callcredit.
Banks and other companies use the data held by these companies to assess your creditworthiness.
The reason you have no single ‘credit rating’ is because the three companies have different ways of assessing you as a credit risk.
Unfortunately you don’t know which agency will be contacted after you rock up demanding £200,000 and a smile from your friendly neighborhood bank / online comparison website.
To be extra diligent you can check all three, using the statutory method I’ll detail below.
I think the best thing to do first though is to check one for free, to see if there’s any low-hanging rotten fruit on your record that you can fix.
If you’re not registered on the electoral roll, for example, or if a former inhabitant at your address – and his unpaid bills – is being erroneously linked with your own finances, then you’ll need to write to the appropriate authorities and/or the agencies to get that sorted.
You should get out of debt as a matter of urgency whatever your situation; this will usually improve your credit score, too.
How to check your credit score for free
A very easy way to check your credit score for free is by signing up to the CreditMatcher service from Experian.
CreditMatcher claims to enable consumers to check their Experian Credit Score entirely for free and is updated every 30 days.
If you’ve never checked your credit score it can be quite an eye-opener seeing how lenders may view you. If you’re new to credit scores, you could consider signing up even if you don’t think you’ll need credit in the near future, just to get better informed.
I wanted to check my credit score because I constantly vacillate as to whether I should buy a home.
Since I think house prices are too high, the main reason to do so would be to lock-in a cheap mortgage rate. However only squeaky-clean customers get the best deals these days, hence I wanted to know my credit score in advance and take remedial action if I need to.
Signing up to the free trial with Credit Expert took all of five minutes, but you can’t get instant access to your credit score.
For security reasons you are not given a secret PIN when you sign-up. Instead, you are mailed it separately by post.
I think this is a sensible precaution (you don’t want criminals impersonating you) but it did take about six days for my PIN to arrive. That’s six days used up out of the 30-day free trial – because membership starts as soon as you complete the online registration.
Once you have the PIN number, it only takes a moment to complete the registration process and see your credit score.
Experian rates you on a score from 0 to 1000. When I last checked my credit score five or six years ago, I scored in the mid-700s, which the company described as “fair”.
You can imagine I was pretty pleased when I saw my new rating:
My new credit score of 999 is only one off the maximum mark of 1,000!
What’s interesting to me is that my financial situation – as far as Experian can tell – is little different to how it was in 2005.
My net worth has multiplied, but the credit agencies can’t see inside my savings and broking accounts. I paid my bills on time back then, and I pay them now.
I seem to have managed to accidentally improve my credit score by:
- Staying in the same house for five years.
- Getting a Platinum American Express cashback credit card.
- Getting a land line and certain utilities in my own name (I shared these 5-6 years ago with a mix of housemates).
- Changing from PAYG to a monthly iPhone contract.
Alternatively, maybe the rumours of ruin for much of the population are true, and everyone else has simply slid further down the credit rankings! If that’s you, see this article from MoneySavingExpert for information on how to improve your credit score.
It’s possible that my credit score could actually hinder some applications – for example if a bank decided it wasn’t likely to make any money from me running up a credit card balance. (It would be right – I pay them off every month).
My score should be good for getting a good mortgage rate, though it would only be one part of a picture including salary, outgoings, and so on.
How to cancel your Credit Expert free trial
Before I signed up to the Credit Expert free trial, I had read that it was very difficult to cancel.
These reports turned out to be misleading, in my experience.
It is true that you can’t cancel online, which is annoying, and perhaps does encourage some people to stay subscribed longer than they mean to out of laziness.
However it took me two minutes to cancel via a phone call.
I called on a Thursday afternoon. The chap on the other end was perfectly polite. There were no hard sales tactics, although I was given the option of identity fraud expenses insurance at a cut-price rate, which I declined.
I can’t discount the possibility he was employing subtle persuasion strategies that evaded my radar. Given that I cancelled successfully, however, it seems unlikely, or at least he failed.
Perhaps the hardest part is finding the number to call to cancel! It may be buried in the service’s FAQ, but I couldn’t find it.
So for reference, to cancel I called:
0844 4810800 – but you can call free on 0800 561 0083
The 0844 number isn’t free, but I didn’t have the free number at that point and I doubt it cost me more than 20p to make the call. (Note you have to call the free number from a landline to avoid being charged).
To ensure you don’t accidentally start paying for Credit Expert membership, mark the 30-day expiry date on a calendar when you set up your account, or better still take off a few days for luck.
Remember the trial begins from when you open the account, not from when you’re granted access, so be diligent to avoid an unwanted bill.
How to get your statutory credit report for £2
Under the Consumer Credit Act, you are entitled to obtain a full credit report from the three agencies I mentioned for £2 for each, via the post (or in the case of Callcredit, also online).
I’d probably do this once I’d cleaned up any obvious black marks via a free trial, as otherwise you’ll need to keep spending £2 to see what’s changed.
Here are the web pages for each company that detail how to get your statutory credit report:
Each company gives you a form to fill-in that you can post with a £2 cheque in order to get your report.
After you’ve cancelled your free trial membership with Credit Expert, you can reopen your account at any time using the same log in details, which will save you waiting for confirmation.
I presume you don’t get a second chance to check your credit score for free, but I could be wrong.
I’ll check-in again with Experian in six months and let you know.
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Experts agree what a good credit score is – is a score 720 or above (noting there is very little need to raise a score above that). Experts say good-to-great credit is 760 or above. A credit score score of 680 range is still considered good (noting if you need credit, you’ll probably get it. It just may not be at a desirable interest rate).
- 720+ is typically a Good Score.
- 800+ is typically a Great Score.
- 650+ is typically minimum credit for loan.
Question: What is a Good Credit Score?
Understanding credit scores is requires understanding how the credit scoring works. Credit scoring gives creditors 3 digit numbers that are calculated according to a mathematical formula with the information in your credit report and how it compares to millions of other people’s credit. The credit score number predicts how likely, or unlikely, it is that you will pay your bills. The better a good credit score number is, the higher likelihood you’ll be accepted for the loan and at a lower interest rate.
There are three different credit scoring models most often used by lenders to decide whether or not to extend an individual credit, but the most commonly used credit score is the FICO score.
Q: What’s the Range of Credit Scores?
60% Of Scores Are Over 700
A good credit score range is between 700 and 850. FICO credit scores range between 300 and 850.The general American public credit scores fall on a bell-shaped curve, with most people having credit scores that fall in the center, as follows:
Credit Scores From Different Credit Reporting Agencies
- There are three credit bureaus which keep information on file about your financial history and activity: Equifax, Experian, and TransUnion. Lenders contact one or more of the credit reporting agencies when deciding whether to extend you credit, to get your credit score and copy of your credit report. While the scores from each credit bureau may be slightly different and have different names, they are all developed with software from Fair Isaac, the developer of the FICO score.
- Credit Bureau FICO Score
- Equifax BEACON Score
- TransUnion EMPIRICA Score
- Experian /Fair Isaac Risk Model
Q: How to Tip the Scale of Credit in Your Favor?
Different activities carry different weight in the calculation of your credit score. Here’s the break down of your score:
The most important consideration in the formula for credit score calculation is how you pay your bills. Your credit score considers how you have paid your bills over time, but your most recent activity is more important than years gone past. If you pay your bills late frequently, you’ll have a lower credit score than someone who pays their bills on time.
Debt and Available Credit: 30%
The second most important consideration in credit score calculation is how much money you owe in comparison to how much credit is available to you. This is your debt to credit ratio, and if you have used all of the credit available to you, lenders consider you riskier than someone who has managed their money better and kept their debt low in relation to how much they could be spending. A good rule of thumb is to keep your debt within 30% of your total available credit for the highest credit scores.
How Long You Have Had Credit: 15%
The longer you have had credit, the better your credit score. This is because lenders have a longer period of time to review your payment habits.
What Types of Credit You Have: 10%
Credit scores are higher for individuals who have a mix of different credit types than for people who have just credit cards, for example. Having an installment loan, a credit card, a mortgage and a car loan is considered a good mix of credit and shows you can manage a variety of credit types.
Frequency of Credit Applications: 10%
If you are filling out applications for credit cards and loans every other day, you’re going to have a lower credit score than someone who isn’t applying for credit. This is because applying for credit frequently makes creditors wonder if you’re in some sort of financial emergency and need access to money – so the more you apply for credit, the lower your credit score will be.
Credit Score Range: Good Credit Score Ratings
- 499 or Less (2% of Population) Horrible
- 500-549 (5% of Population) Worst
- 550-599 (8% of Population) Bad
- 600-649 (12% of Population) Poor
- 650-699 (15% of Population) Okay
- 700-749 (18% of Population) Good
- 750-799 (27% of Population) Excellent
- 800 or more (13% of Population) Best
550 Credit Score and Below : You’re considered an “at-risk” buyer, and while it’s not impossible to get credit, interest rates can exceed 10 percent.
551-560 Credit Score : Not considered “good” credit. People that fall into this category should work to raise it so they can qualify for loans at lower interest rates. Often times, with a score this low, they’ll need a co-signer.
561-570 Credit Score : It’s still going to be tough to get approved for a mortgage or a car loan at reasonable interest rates, if at all, with this score.
571-580 Credit Score : This is still a bad credit score that has lenders perceiving you as an at-risk client, putting in jeopardy what you may qualify for.
581-590 Credit Score : A score in this range is evident of a poor credit history, which is a turn-off for many lenders.
591-600 Credit Score : Get your score up to 600 to become eligible for more types of loans and at lower interest rates. This is still borderline poor credit.
601-610 Credit Score : Most people have credit scores in the 600s or 700s, but until you get to that 620 threshold, you’re considered an “at-risk” client by many lenders.
611-620 Credit Score : A score below 620 hints at past credit problems, making it tough to get a low interest loan.
621-630 Credit Score : You’re above the 620 cutoff, which many lenders use as a line to determine whether or not to grant you approval.
631-640 Credit Score : According to the Wall Street Journal, this credit bracket will have you paying higher interest rates. For example, on a $150,000 30-year mortgage, people can expect to pay some $2,000 more in interest than someone with higher credit.
641-650 Credit Score : Focus on getting your score to 650 and beyond, as this will open the door to better interest rates.
651-660 Credit Score : Anything at or above 650 is considered a “good” score, able to qualify for reasonable interest rates.
661-670 Credit Score : You’ve improved upon your “good” score, now work on getting it to 700 to be eligible for better interest rates.
671-680 Credit Score : Again, while this score isn’t terrible, focus on building it up to 700. It’s considered the “new normal.”
681-690 Credit Score : A score of 700 is within sight. Focus on getting there to get better interest rates, as that’s what is becoming considered the “new normal.”
691-700 Credit Score : Not a terrible credit score, but worth your time to get it up to 700 or 720 to get the best interest rates on loans.
701-710 Credit Score : A score of 700 is the unofficial number in which you can qualify to get the best interest rates on a loan. You’re considered to have a good credit standing once you hit 700, which helps establish you as a qualified buyer.
711-720 Credit Score : To qualify for the best interest rates on a loan or credit card, you want to have a score north of 700, according to the New York Times. A score in this range helps solidify it.
721-730 Credit Score : CBS News says a score of 720 or above is the best number to have and unnecessary to try to raise any higher. At this number, you’re viewed as a minimal risk and can snag loans at low rates.
731-740 Credit Score : You’re beyond the 720 mark, and while it won’t hurt to raise your score higher, it’s not necessary under most circumstances.
741-750 Credit Score : While it won’t hurt to raise your score higher, it’s not necessary under most circumstances.
751-760 Credit Score : Again, you’re beyond the 720 mark, meaning that you’re already eligible for good interest rates on any credit you’re taking out.
761-770 Credit Score : If you’re credit is entering the high 700s. It shows you’re a very trustworthy client.
781-790 Credit Score : You’ve eclipsed the 720 mark and while getting a higher score won’t hurt you, it likely won’t help you much either.
791-800 Credit Score : If you’re bordering on 800, you’re in terrific credit shape. This score is proof that you’ve always been on time with any payments (bills, loans, etc) and don’t have a lot of credit taken out.
801-810 Credit Score : Anything 800 or over is exceptional credit, yet people with this good of credit typically won’t qualify for any lesser interest rates than those with 720.
821-830 Credit Score : You’re 100 points above the 720 cutoff mark, and while it doesn’t hurt to go higher, it’s not necessary. You currently have “excellent credit.”
831-840 Credit Score : Again, a great credit score, but unnecessary seeing as how this is often grouped into the 720 and above category.
841-850 Credit Score : An excellent credit score, but most lenders will still be pegging you in the “720 category” as a preferred customer.
How Credit Scores Affect Your Interest Rates
Not only does the credit score help a lender decide whether or not to approve your application for credit, but it also plays an important role in how much interest you pay on the money you borrow. The following is an example of how your FICO score might affect mortgage interest rates, but keep in mind each lender has it’s own credit tiers and interest rates:
Credit Score Scale for Sample Credit Interest Rate
If a lender is offering their best rates to borrowers with a score of 760 or better, and your credit score is 758 – those two points can cost you thousands of dollars in interest over the life of the loan.
You Can Raise Your Score in as Little as 4 to 6 Months By Following These Two principles:
- You Can Quickly Raise Your Score By Paying Down Balances (some experts believe to keep your balance about fifty-percent of max limit)
- Another Way to Boost Your Score is to Pay On Time (which will have the biggest impact)
Other Tips on Raising a Credit Score:
- Some experts think paying more than the minimum credit card payment can actually help by causing your month-to-month debt not grow.
Once you know what your credit score is, you may decide you need to increase it. There are a number of steps you can take to improve your credit score, but many will require patience as the score doesn’t increase over night when you implement these steps:
Pay Your Bills On Time – the most effective way to increase your credit score over time is to consistently pay your bills before they’re due.
Pay Down Debt – if you currently have debt, focus on paying it down or paying it off completely. As you reduce the amount of debt you owe, you will increase your available credit in relation to what you owe – which is a factor in calculating your credit score. The lower your debt in relation to the amount of credit available to you, the higher your credit score will become.
Correct Mistakes – it’s a good idea to review your credit reports from each of the three major credit reporting agencies (TransUnion, Equifax and Experian) annually to make sure there are no errors. You can get a free report once each year from each of the agencies. If you find any errors, make sure to follow the instructions of the credit reporting agency to have them corrected.
Don’t Apply for Additional Credit – while you are working on increasing your credit score, avoid applying for new sources of credit. Each time you apply for credit, it counts as an “inquiry” and will decrease your score.
Good credit scores for credit cards start at 620 for approval, but better interest rates and credit cards are offered to people who have credit scores above 720 (Credit Score Needed for Credit Cards). If you are unable to qualify for a credit card, you can consider a secured credit card for people with low credit scores. Secured credit cards require that you put a deposit down as collateral, but the credit card company will report your on-time payments to the credit bureaus which makes it possible to use the secured card to start increasing your credit score.
Each lender has their own set of criteria for what is considered a good credit score. The range of credit scores that are considered good enough for various types of credit will change based on the condition of the economy, too, so the score that was considered “good” two years ago may not still be considered “good”, today. View our other articles on credit scores: Good Credit Score to Buy a House, Credit Score Needed for a FHA Loan and Good Credit Score for a Car Loan.
With all types of lending, the lower your credit score, the higher your interest rate will be. It’s always in your best interest to improve your credit score as much as possible to get the best rates and qualify for credit.
A good credit score for buying a car is generally in the 700 range, although you can probably qualify for higher interest car loans with scores above 620.
You will probably need a 730 or higher credit score needed to buy a house and qualify for a traditional mortgage program, but there are often specialty mortgage programs for individuals with credit scores as low as 650.