Equifax reveals major changes to its credit score scale – and it could downgrade your rating

CREDIT reference agency Equifax has launched a new scoring system that alters how Brits are assessed when applying for finance such as loans and overdrafts.

The revamp scraps scores that would have given a “very poor” rating but consumer watchdog Which? warns that those who were previously rated as “good” could be downgraded to “fair”.

Equifax rejigged how it calculates its scores this weekCredit: Getty

Your credit score is important if you ever want to apply for money such as a loan, mortgage, credit card or overdraft.

It is linked to your credit report which details your financial history and monitors how good you are at repaying.

Lenders want to see evidence that you are a reliable borrower and will use your score as part of their assessment.

Those making regular repayments on time will have the highest scores and find it easier to access top credit deals.

How to improve your credit score

WE explain how to improve your credit score.

Don’t make too many credit applications – Making lots of requests in a short period of time can be seen as a sign of financial distress – and each application will be recorded on your file. Use a “soft-search” eligibility calculator to show how likely you are to be accepted.
Always pay your bills – Late payments are also recorded in your file so make sure you pay your monthly bills on time including utility and credit cards.
Pay down your debt – Try and cut down your existing debt before applying for new credit as lenders may be reluctant to lend to you if you already have a large amount of debt.
Use a credit-builder credit card – These cards tend to have high interest rates compared to normal cards but if you can show you’re a responsible spender with them, it can improve your chances in the eyes of lenders.

In contrast, if you fall behind on your bills such as missing a credit card payment, your score will be reduced.

This can make it harder to get the best deals.

Your credit score can also be hit if you have too many rejections for credit.

Equifax is one of the three main credit reference agencies alongside Experian and TransUnion.

All three have their own scoring system that will give you a rating usually from “poor” to “excellent.”

Equifax has now rejigged how it calculates its scores this week.

Under the old system, users were scored out of 700 but now the ratings go up to 1,000.

Research by consumer watchdog Which? has found that a score of zero to 278 previously would have given you a “very poor” rating.

This has been removed and ratings now start at zero to 438, which is described as a “poor” score.

You also now need a higher score to be rated as “excellent.”

What your Equifax score means

WHAT your Equifax credit score means and how it has changed:

Old scale

0 to 278 – very poor
279 to 366 – poor
367 to 419 – fair
420 to 466 – good
467 to 700 – excellent

New scale

0 to 438 – poor
439 to 530 – fair
531 to 670 – good
671 to 810 – very good
811 to 1,000 – excellent

Source: Which?

Previously, an “excellent” rating was given to those with a score ranging from 467 to 700.

You now need a score of 811 to 1,000 to get an “excellent” rating.

The changes also mean that your rating would be reduced to “fair” if it is 467 and needs to range from 531 to 670 to be “good” or 671 to 810 for “very good”.

Previously, a rating of 420 to 466 would have given you a “good” score.

The Sun has asked Equifax for further comment on if the changes reduce people’s ratings.

Equifax said the new system creates more accurate credit scores which should make it easier for borrowers to see how likely they are to be approved for financial products.

Jayadeep Nair, chief product and marketing officer at Equifax UK, said: “Building a true picture of creditworthiness is a challenge for lenders, with important risk consequences for both their businesses and the wellbeing of their customers.

“Ensuring credit decisions are made using the latest predictive data available is more important than ever, as society navigates through the
continuing financial uncertainty created by the pandemic.”

You may not need to worry too much about a change in your score though.

Martin Lewis wrote in his MoneySavingExpert blog this week that a credit score doesn’t factor in whether you can afford to repay the loan – which is called the affordability test and is assessed by a lender.

He said a lender’s affordability assessment is “just as important” as your credit rating.

How to check your credit score

All three credit reference agencies let you see your credit report and score for a monthly fee but it is also possible to access this data without paying for a subscription.

It is important to regularly check your credit report to spot any errors that may make it harder to get decent finance deals.

For on-going monitoring, here’s what the three credit reference agencies provide:

Equifax: You can check your score and report for free for the first 30 days, after which it’s £7.95 a month.
Experian: You can check your score for free using its online service. But if you want to check your report itself, you can only do this for free using a 30-day trial, after which you’ll be charged £14.99 a month.
TransUnion (formerly Call Credit): You can sign up to its Credit Karma service for free to get unlimited access to your report and score for life.

You also have a legal right to request a statutory report on data that credit reference agencies hold on you but this won’t include your score. You can usually apply for this on a credit reference agency’s website or by post for free.

Alternatively, you can check your credit score for free using the following third parties: