A puzzled ClearScore user asked:
My credit score has gone up but my affordability has gone down…
not sure why sometimes I think these credit score companies just do what they want lol.
Her credit score had increased by 57 to 573, but at the same time, her affordability score had fallen by 15 to 64.
These weren’t tiny changes… ClearScore affordability scores are out of 100, so a 15 point drop is large. It’s equivalent to a 150 point drop in a credit score that is out of 1000.
Both the numbers come from the same Credit Reference Agency, Equifax. And are on the same ClearScore report.
What is going on here?
Credit scores look at your credit history & balances
Your credit score is an assessment of how likely you are to default on any new credit. But it doesn’t actually look at your current finances, just how you have handled credit in the past and what credit you have got at the moment.
It can seem mysterious what makes your score change:
- missed payments, defaults, CCJs and insolvency (IVAs, bankruptcy etc) all harm your credit score;
- using a high proportion of your credit card limit and using your overdraft also harms your score;
- paying credit on time and having low credit card balances helps your score.
- How much will my credit score change if … ? gives some numbers in simple situations.
Although it’s common to talk about “your credit score” you actually have three different scores, one from each of the three CRAs, Experian, Equifax and TransUnion.
Many lenders only report data to one or two CRAs so each of the three CRAs will see different information about you and calculate a different number.
Affordability scoring looks at your bank account
ClearScore introduced affordability scores in addition to credit scores last year. To get this score, you have to let ClearScore access the last 5 months of your bank account data using Open Banking.
The aim is to predict how much spare money you have available for paying any new credit. ClearScore says:
So while your credit score looks at the past, your Affordability Score helps paint a picture of the future.
They haven’t explained much about how this score is calculated. It seems that some of the things it looks for include:
- whether you are making payments to debt collectors;
- whether you spend much on gambling;
- how much cash you withdraw;
- how much money you have left at the end of the month.
Inflation will hurt affordability
Many people’s bank accounts will be looking less healthy now than they were a few months ago because of the rising cost of living.
That is what an affordability score is measuring. If you now have less money left at the end of the month, your affordability score is going to drop.
And that is almost certainly the explanation for why you can see your credit score increase nicely at the same time as a large drop in your affordability score.
It may be harder and more expensive to get credit
Lenders may not use the ClearScore affordability number directly, but they do assess whether you can afford new credit you are applying for. You may find that you are rejected for cheap credit or that you are offered a higher interest rate than you saw advertised.
Last week in Santander starts frantic rush to scale back mortgages as banks get tough on cost of living crisis it was reported that mortgage lenders are introducing tougher affordability assessments.
This looks set to continue. April has brought higher energy, broadband, mobile, council tax and many other bills. These haven’t yet started to show up in your bank statements, so the ClearScore affordability score for many people may continue to fall.
(thanks to Instagram user Savewithme.2022 for permission to use the picture)
MSE Credit Club to use TransUnion data
2022 – BNPLs are now on credit reports
Can you get a refund of overdraft charges?
Katharyn says
Is there an ombudsman to complain to if you think the CRAs aren’t accurately representing your score despite having contacted them or would it just be the financial ombudsman.
Sara (Debt Camel) says
why do you think it is wrong?
Charlie Haldane says
Credit scores in the uk are all subjective as the lender will have its own lending criteria. All the credit score companies in the UK will give you different scores. They are also bad at keeping the information correct. It’s a nightmare getting things changed. Transunion is very slow at dealing with complaints and correcting information. (even before the now all to familiar we are experiencing higher than normal calls) they are even slower now.
Stephen Harrison says
All credit score companies seem interested in is getting you to take out more credit cards. My score on Clearscore 778 Experian was 902 but now 863. I only use Credit cards for Emergencies, such as my computer breaks down or needs parts replacing. However, Totally money says I have poor affordability. Really I just think they know how much money you have in your bank account.
Andrew says
My clear score ( equifax) rating is 105, my trans union rating is 505 whereas my experian rating is 697. All have exactly the same information, why such a difference if they all have exactly the same information. My Equifax rating was 180 but they said I wasn’t on the electoral register, when I told them my address they had wasn’t complete, ie. Flat 1, 86 Embankment rd, not just 86 Embankment rd, they dropped my rating to 0. Then after they confirmed I was on the electoral register it went up to 20, that was nine months ago. Honestly I have No faith in CRA,s. My scores are not good because of previous debts that for the last four years have not improved because I have been on Universal Credit and have had zero excess cash to pay off anything. I do have a debt with virgin that they refuse to let me pay off because I cannot remember my login details and therefore cannot get past security. I am 59 with no assets, no savings and no pensions, not a lot left to live for, treading water and getting tired.
Sara (Debt Camel) says
It sounds as though your credit scores are a not very important part of your current problem – your life wouldn’t change if they all had the same good credit score, you still would be unable to pay your debts and would find life hard on benefits.
Do you have any health problems that make it hard to find work?
Andrew says
Anxiety and depression, breathing problems. Have had capability for work test on UC and been deemed to have limited capability for work.
Sara (Debt Camel) says
Ok then I suggest you talk to your local Citizens Advice about benfits – there may be extra help you can get locally and they can talk about whether it’s worth applying for PIP.
And they can also talk about your debts. because of your health problems and age. they may suggest asking the creditors to write off your debts. Or they may propose a Debt Relief Order, see https://debtcamel.co.uk/debt-options/dro/
Nick says
The CRA affordability scores can be a bit daft, and I wouldn’t put much weight on them. Mine are quite low because my primary bank does not share data with the CRAs, so they think that my income is a few hundred pounds a month, which is what I transfer into my secondary accounts. Despite this, I have a £50K total line of credit on my credit cards, and an excellent CRA score with all agencies, simply by having had an unblemished repayment record (all paid off each month) for over 6 years. Any lender for anything serious like a mortgage will presumably want to see payslips or actual bank statements rather than rely on CRA data.
J says
It should also be noted that credit card limits when dropped to a low limit by the CC company will affect your ‘worthability’ two fold, Barclaycard dropped mine without any readson other than so was in a dispute with them on my current account.
I went from a 10k limit to £150 overnight, no reason was given by Barclaycard other than ‘check my credit file’ which I did and my rating was 950 or something, but because they cut my limit other prospective lenders would see my credit availability as poor if/when I applied for a loan/up my credit limits etc. in short Barclaycard without and good reason directly/indirectly affected my credit worthiness nut not my credit score. I had no late payments, no limits reached and no court orders or whatever but due to them dropping to £150 they affected everything else.
Kim says
Very similar point to what Nick has made, for something like a mortgage – an inaccurate credit score or report won’t matter too much if your real finances are in good shape. I was recently offered a mortgage by Natwest and my HSBC credit card was still showing a balance on one of the credit reports. All i had to do was provide a copy of a cleared balance (along with all the other documents they require, i.e. payslips/bank statements/ savings) and it was all fine.
You probably already know this as it is documented a lot , but it is worth sorting out any balances/updates/errors a good 3-4months before applying for whatever financial product you may need.
Sara (Debt Camel) says
I suggest 6 months before for a mortgage. At least!
Nick says
After a few months of sharing my current account data with the CRAs, to see how they assess my affordability, Experian now gives me +51 Boost, and Clearscore 93/100. These seem a bit on the mean side, as my income is well in excess of my expenditure. The strangest factor is on Clearscore: “Lower your transfers out. Your transfers in are only £100 more than your transfers out during a typical month. Aim to transfer at least £200 more in than out across your linked bank accounts in a typical month. Transfers are not your income or benefits you receive. Transfers out are when you send money from your account to someone (for example, family, friends, tradesperson). Transfers in are when someone sends money to your account. By showing all your transfers in and out, it helps lenders understand if you’ll be able to keep up with payments.”
I don’t actually have any transfers in, on that definition, and I imagine that few people do! What an odd metric.
Sara (Debt Camel) says
ClearScore’s affordability score is very strange. I wouldn’t pay much attention to it.
Nick says
It is indeed. I did actually email Clearscore about the weird transfers in/transfers out element and they said that they would look into it. They also reiterated that no one apart from you sees their score. By contrast, Experian will share your “Boost” numbers with lenders, presumably for a fee. “Affordability” seems to me something that anyone can easily work out for themselves on a money in/money out basis, whereas credit scores are in many ways a black box.
Briar says
Hey Sara
I found this article following a conversation with a client at a food bank who didn’t want to engage with a community money advisor for fear that it would affect her credit score. So a group of us are trying to figure out what the actual impact of a CMA giving advice to someone does to either their score or history.
My feeling is to give budget advice there would be no impact from us but there may be an impact due to the client changing their behaviour as a result. Hopefully for the better.
If however we are giving debt advice and get more involved with the client’s creditors by asking for interest to not be charged or agreeing a minimum payment their credit score/history would be affected.
I would be interested to know your views or could refer me to an article that outlines more.
Sara (Debt Camel) says
Advice never hurts your credit score – whether this is budget advice or debt advice.
Nor does checking your credit score – although a client may be reluctant if they don’t want their current address on their credit record.
If the client changes their behaviour as a result, the effect could be positive or negative. Normally positive if this is “just” budgeting advice and help to access more benefits or grants. Normally negative if payment arrangements and/or prioritising bills arrears are needed.