29/5/26

Why doesn’t my credit score add up?

The bizarre system of credit scoring can punish the prudent and indebted alike

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This article is republished from The Financial Times

Are you obsessed with your credit score?

With 1.8mn British households looking to remortgage this year and outstanding credit card debt at a record £78bn, the answer could well be yes.

The number of Britons checking their score has shot up 18 per cent in the past year, according to Experian, the credit reference agency. Nobody wants to find a nasty surprise lurking in their credit file.

Checking it regularly ensures lenders have an accurate view of your creditworthiness, boosting your ability to access the lowest rates.

In the run-up to my house move last year, I signed up to a bunch of credit-scoring apps.

Thankfully, I had no problems securing my new mortgage.

Yet eight months later, while I had a “perfect” score with one of the three UK credit reference agencies, my score had nearly halved with another!

Finding out why has taught me a few things that might help you.

There are many myths about credit scores.

For one, lenders never see your actual number. It’s just a shorthand for consumers, indicating how lenders will probably view the historic borrowing data in your credit report.

What lenders see are the accounts you hold, the debts you have (and, crucially, your repayment record), plus your address history and records of any court judgments.

However, your salary and savings have no bearing on your credit score. You could earn a million pounds a year and have a million pounds in the bank, but if you had no borrowing history or had recently moved to the UK, you could still struggle to get a phone contract.

Your salary and savings have no bearing on your credit score

This is known as having a “thin file”.

To bust some other myths, checking your credit score does not lower your rating.

And carrying a balance on your credit card does not give you a higher score than smug people like me who clear their balance in full every month.

Confusingly, the UK’s three biggest credit reference agencies all have different ways of calculating scores.

Experian now marks you out of 1,250; Equifax out of 1,000, and TransUnion out of 710.

So a score of 640 would be “poor” with Experian, but “excellent” with TransUnion.

While your precise score can vary between the three, it should be within the same band.

So how come I scored 100 per cent with Experian but a dismal 54 per cent on the ClearScore app, which is powered by Equifax?

My first panic was that I must have missed a payment (I hadn’t).

If I had, and had resolved this quickly, a year of careful repayments would be enough to rectify any dent in my score.

However, moving house is the most expensive thing I have ever done. In the space of a few months, I went from being someone with no mortgage who rarely paid on plastic to having a new home loan, plus a house full of new furniture and white goods.

Of course, this affected my score, but after six months of repaying the new mortgage, you would expect it to bounce back.

I paid for the furniture on my trusty John Lewis credit card.

I could have used my savings — but then I wouldn’t have got the consumer protection benefits, not to mention the credit card points!

However, the ClearScore app marked me down for having high credit utilisation.

Spending more than 50 per cent of my card’s credit limit in a single month made me look a riskier prospect, even though I cleared the balance in full a few weeks later.

Splitting this between two cards and staying under 30 per cent of the credit limit would have made me look less risky.

Fellow points chasers, take note.

You might think that closing old accounts or even switching bank accounts for a free cash bung would be a prudent move.

But by reducing the age of your credit, you could unwittingly dent your score.

One credit-scoring tip I did know about was getting on the electoral register, and I did this as soon as I moved in, along with updating every single financial provider with my new address.

Don’t forget your digital accounts — this was very nearly an issue when I switched my stocks-and-shares Isa provider last month.

But the only place where I hadn’t checked my address?

The bloody credit score app itself!

ClearScore investigated, and found that while my new address had been automatically detected, I hadn’t ticked a box to verify it was my current address.

In fairness, the app never asked me to.

It has now updated its app, so anyone with a new address will be prompted to do this.

But having two addresses meant I had a “partially mismatched profile”.

This mismatch exaggerated the impact of what should have been minor issues, wiping more than 400 points off my score.

Ironically, credit experts tell me that other people at risk of a mismatch include those with unusually spelt names (!) or an address which could exist in more than one form.

If your house has a name (think Dunroamin) or it is divided — think 129a and 129b — this can sometimes be an issue.

Thankfully, I am now rated “excellent” again.

But if your credit history is not great and you have a default on your file, it will take six years to clear and make borrowing more expensive in the interim — maybe even impossible.

To improve your prospects, all the credit agencies are encouraging people to connect their current accounts via Open Banking.

Even if your score is low, real-time account data can prove you’re managing your financial affairs well and could therefore afford debt repayments.

Those who were previously told “no” based on their credit report alone could be more likely to get a “yes” at a better rate of interest.

But my final tip?

Don’t rely on credit-scoring apps to find your next balance transfer deal.

The unsolicited offers I’ve been sent this week could not match the best buys on MoneySavingExpert.

But I do not intend to spend any more money on plastic for a very long time.

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Claer Barrett is the FT’s consumer editor; Instagram