Why isn’t my credit score higher?
“I have a great job. I pay all my bills in full, on time and have never paid anything late, let alone had a default. I paid off a personal loan early. I’m ahead on my mortgage. I have a lot of money in savings… Why isn’t my credit score excellent? It should probably be 1000!”
These are fair questions, but unfortunately credit scores don’t quite work that way. We’ll tackle these one by one below:
I HAVE A GREAT JOB
Whilst your credit report can contain the name of your employer, there is no information held about your actual income or job (unless you’re a company director or an owner of a business). Therefore, even if you’re earning a sweet six-figure salary, it doesn’t affect your score.
I PAY ALL MY BILLS IN FULL AND ON TIME
We definitely encourage you to pay all your bills on time but it is important to know that comprehensive credit reporting or CCR is only just starting to roll out. This means that your specific repayment information is only now starting to contribute to your credit score and that banks and other lenders are now starting to find out what credit accounts you actually have (not just what you have applied for in the last 5 years).
I’VE NEVER HAD A DEFAULT
This will certainly have a positive impact your score but of course is only part of the puzzle.
I PAID OFF A PERSONAL LOAN EARLY; I’M AHEAD ON MY MORTGAGE
Whilst this is responsible and good credit behaviour, credit reporting rules and regulations mean that your balance information will not be shared or held by credit reporting bodies even when CCR is truly here.
I HAVE LOTS OF SAVINGS
Again, whilst that is great, credit reporting bodies have no visibility of assets held and as such cannot take any of that into account when calculating a credit score.
SO DOING EVERYTHING RIGHT ISN’T WORTH IT?
Being as responsible as possible with your finances is definitely something to strive for. When it comes to credit scores, it is important to look at the context.
Credit scores can be used by lenders to determine whether to give you credit and at what rate. Once your score gets up in the excellent (say above 800) range then you may well already have the best opportunities and offers open to you. The actual difference between a score of 850 and 900 actually is very small in terms of perceived risk. And no bank has a secret product only available to people with a perfect 1000!
Keep doing the right things. Keep doing them over a long time. Ultimately your score should head in the right direction. There may be no such thing as a perfect score but you can shoot for the moon and land among the stars!
Credit Savvy can help of course by helping you track your score and continuing to show you what’s on your Experian credit file and alert you to any changes.