ONE of the UK’s largest credit rating agencies is changing how it calculates scores.
Experian is shaking up its credit scoring system to reflect “everyday financial behaviours that matter”, which is good news for diligent renters.
Tenants living in rented properties will be recognised for paying their monthly bill to landlords on time.
The new system will also reward those who cut overdraft use and avoid credit card advances.
Those making mortgage overpayments will also be viewed favourably by Experian.
Plus, it’ll monitor regular payments on mobile phone contracts as well as how often people switch providers.
READ MORE ON CREDIT SCORES
Meanwhile, the agency has upped the maximum credit score to 1,250, rather than 999.
The five bands will also be renamed, with “poor” and “very poor” being axed, as well as the use of the colour red.
The categories will now be named Excellent, Very Good, Good, Fair and Low.
What the changes mean for you
The new scoring will start to be rolled out this month and will reach all UK customers by the end of 2025.
Existing customers will see their score automatically updated and emailed once available.
Those using the free app and credit score service will be able to access the new features.
People expected to benefit from the changes in particular include those looking to improve their score, while it is also particularly helpful for those with a limited credit history.
To benefit from the change to rental records, however, tenants have to opt in for their rent payments to be recognised.
The new system will not affect someone’s ability to get credit, while eligibility for mortgages, loans or credit cards remains unchanged.
However, it does mean borrowers may change the credit bands they fall under.
For customers in the low band, instructions will be given on how they can increase their score.
Experian said 44% of customers are expected to drop down a score banding, 42% could move up a banding, and 14% will stay the same.
They also warned that whilst regular and timely payments would be rewarded, missing or delayed rental payments would harm someone’s credit score.
Edu Castro, managing director of Experian Consumer Services, UK & Ireland, said: “The way people manage their money has evolved, and our score has evolved too.
“Our new Experian Credit Score better reflects more of the everyday financial behaviours that matter – like paying rent or reducing overdraft use – offering a clearer understanding of the information on your credit report.
“This means people get a more personalised view of how they’re doing financially and more practical ways to improve their score – helping unlock better borrowing opportunities for the future.”
Why your credit score is important
Your credit score is a three or four-digit number that reflects how reliable you are at borrowing and repaying money.
A low credit score can make it harder to get a mortgage, loan, or hire purchase agreement on a car.
As well as Experian, there are two other credit rating agencies in the UK: TransUnion and Equifax.
Experian is the only agency to overhaul how credit is measured.
Each credit reference agency (CRA) has a database of information where it tracks your loans and repayments.
Using this data, the CRAs generate a credit report and a three-digit or four-digit credit score, which indicates how reliable you are.
The credit report examines a wide range of financial information, including personal details such as name, date of birth and address, as well as if the person is registered on the electoral roll.
It also records credit accounts, like loans, credit cards, mortgages, overdrafts and mobile phone contracts.
To check your credit score, visit Experian, TransUnion or Equifax.
You can get a free account on Experian to see your credit score and access tools to check your eligibility for credit offers.
How to boost your credit score
IMPROVING your credit score takes time and consistent financial management, but there are things you can do to help boost your credit score.
- Make sure to pay your bills on time every month
- Set up direct debits for bills, credit cards and loan repayments to keep you on track
- You will be monitored on how much available credit you use (credit utilisation) by keeping it low – ideally below 30% of your total credit limit – you can improve your score.
- Constantly reaching your limits on your credit cards suggests financial strain, even if you make payments on time.
- If you aren’t already, make sure to register on the electoral roll at your current address. Lenders and credit reference agencies use this information to confirm your identity and stability. Being on the register can add a few points to your score
- Keep your personal details up to date with your bank and creditors
- Limit how often you apply for new credit. Each application you make triggers a hard search on your credit file, which could temporarily lower your score.
- Review your credit report regularly with all three agencies to make sure the information is correct.
