Your Credit score is a pivotal element for proving creditworthiness to banks or any other financial institution. There are different ranges of credit scores, varying from Excellent to Fair to Poor.

A fair credit score can be helpful in getting personal loans and other credit applications when you are struggling financially. In this article, we’ll shed light on the definition of a fair score, the factors that influence it, and its significance in today’s credit-driven society.

What is a fair credit score in the UK?

A Fair Credit score in the UK varies between the three major credit bureaus: Equifax, Experian, and TransUnion. Each has its own criteria for scoring your credit report, meaning you may have multiple scores across the three.

Equifax

The fair credit score for Equifax is 531 to 670.

Experian

For Experian, it’s 580 to 669.

TransUnion

And for TransUnion it’s 661 to 720.

What does it mean if I have a fair credit score?

Having a fair credit score represents a moderate level of risk to the lender while extending credit to subprime borrowers. Further, a fair score may attract a higher interest rate and access to only a few financial products.

You might get a loan or credit card with a fair score, but the terms may not be as flexible as those with a good credit score.

Implications of fair credit scores

Having a fair credit score affects various aspects of your life. A few most significant ones include the following:

1. Access to credit and loan products

With a fair credit score, you may find it challenging to qualify for certain types of credit, such as low-interest rate loans and credit cards with attractive rewards. Lenders may be more cautious when considering your applications, and they may offer you less favourable terms compared to those with higher credit scores.

2. The impact on interest rates and terms

If you are approved for credit with fair credit, you’re more likely to face higher interest rates on loans, credit cards, and other forms of credit. This means that borrowing money will cost you more in interest payments over time.

3. Reduced credit limits

Lenders may also grant you lower credit limits with a fair score, which could limit your ability to make significant purchases or handle emergencies using credit.

What affects your credit score?

Several factors affect the credit score, such as:

1. Length of credit history

One of the aspects that significantly affects your credit score is the length of your credit history. Credit lenders prefer a longer history to see you as creditworthy.

2. Payment history

Missed payments on your credit card or loan lead to a negative impact on your credit score.

3. Available credit

If you have more credit limits on your card, it is best to use as less as possible (around 30% or less). If your usage goes over this limit, your credit score is negatively impacted.

4. Types of credit

If you have more credit cards and loan instalments and you pay them timely, your credit score will see a positive impact on it.

5. New credit

If you have tried to open multiple credit accounts in a short time, it will impact your credit score negatively.

How to improve a fair credit score?

Fair credit scores fall at the lower end of the credit-scoring spectrum. Around 11% of the UK population has a fair score. But don’t worry! There are steps and strategies that you can put into action to get a higher credit score.

1. Check your credit report

Start by obtaining a copy of your credit report from all major credit reference agencies in the UK, such as Experian, Equifax, and TransUnion. Review the reports for any errors, inaccuracies, or fraudulent accounts. Dispute any discrepancies you find with the respective credit agencies to have them corrected.

2. Pay your bills on time

One of the most significant factors affecting your credit score is your payment history. Make sure to pay all your bills, including credit cards, loans, utilities, and other debts, on time. Late payments can have a negative impact on your credit score.

3. Set up payment reminders

Missing payments can happen unintentionally. Set up payment reminders or automatic payments to ensure you never miss a due date.

4. Manage your card balance and debt wisely

Keep a close eye on the limit of your credit card and the balance. Focus on keeping the usable credit limit low and the credit card balance zero. Using too much of your credit card amount can push your score into the lower spectrum. Massive transactions might also find their way towards a credit bureau.

5. Be patient

Improving your credit score takes time, especially if you have fair or a bad credit score. Stay persistent in your efforts to manage your credit responsibly, and your score will gradually improve over time.

People with fair credit are already better off financially than those with poor credit, but you shouldn’t stop there.

How to monitor your credit score?

Monitoring your credit file allows you to identify any errors or inaccuracies that may appear on your credit history. These inaccuracies could be anything from incorrect account information, late payment notations, or even accounts that don’t belong to you. To rectify these issues, you should follow these steps:

• Obtain your credit reports from any of the credit reference agencies.
• Thoroughly review each credit report, paying close attention to any discrepancies or inaccuracies.
• If you find any errors, file a dispute with the credit bureau that issued the report containing the inaccuracies. You can usually file a dispute online through their websites or by sending a written letter.
• Along with the dispute, include any relevant supporting documents that prove your claim. This could be payment receipts, correspondence with creditors, or any other evidence supporting your case.
• Once you file a dispute, the credit bureau will investigate the matter with the relevant creditor. They will either correct the information, update it, or delete the inaccurate entry from your credit report based on the results of their investigation.

Conclusion

While credit score ranges may vary slightly depending on the scoring model and the credit bureau used, a fair credit score generally indicates that a person’s creditworthiness is moderate, but there is still room for improvement to qualify for more favourable loan terms and interest rates.

Having a fair score in 2023 may mean that individuals could face challenges when applying for certain loans or credit cards, and they might be offered less competitive interest rates – that’s why it’s important to have good credit scores.

FAQs

Disclaimer: The information given above is provided for reference only. This is not financial advice.

Related guides:

How to Improve Your Credit Score in 30 Days

What Credit Score Do I Need for a Loan

What Is the Average Credit Score in the UK