In mid November 2021, ClearScore has finally adopted the new 1000 Equifax credit scores.
Equifax credit scoring changed in April 2021, when it switched to calculating scores out of 1000 – they used to be calculated out of 700. It also changed the bands used to describe your credit rating.
Equifax didn’t make an announcement about these changes. The Equifax Credit Report & Score was updated but hardly anyone uses that.
11 million people see their Equifax data using the ClearScore report. That continued to use the old-style Equifax scores out of 700. But in mid-November I saw this on my ClearScore report:
So what is happening and how does this matter to you?
How will the score changing affect you?
Your credit record hasn’t changed – a higher score isn’t better
You might think a higher number sounds good – but it doesn’t mean your credit history has improved. You are just being shown a different number.
It like a teacher saying “I normally mark your project out of 10, but from now on I am going to mark out of 20 instead”. If you had 7/10 for your last piece and next get 14/20 your work isn’t any better.
Lenders don’t use these scores that Equifax calculates for you at all.
Some lenders use the Equifax data and some of them get Equifax to calculate a score for them, so the credit history Equifax holds is important for your chance of getting a loan or a credit card.
But the scores lenders use are not the ones you can see, so the fact your headline number has changed won’t affect whether your credit application is approved.
As Clearscore says:
Your score may look higher, but you’re not more likely to be accepted for new credit by lenders.
Equifax now puts scores into different bands
Equifax used to use Very poor – Poor – Fair – Good – Excellent to describe your credit rating.
The numbers would have to change for the new 0-1000 scale, but Equifax has also decided to change the band names to Poor – Fair – Good – Very good – Excellent.
This table shows the old Equifax guidelines compared to the new ones:
|Equifax rating||previous||from 2021|
It isn’t easy to see from that at a glance, but some of the changes in the bands are large and they haven’t all been caused by the change to 0-1000 scoring. It is clearer in a diagram:
- no-one has a Very Poor credit score anymore and most people who were rated Poor before are now Fair
- the new Good band is much larger than the old one, so more people will be in it;
- the previous Excellent band has been divided into two, so some people will see their rating “drop” to Very Good.
But these are just labels… once again they don’t have any impact on whether you are likely to be accepted or rejected for credit. Equifax could have called them “Pants” and “Awesome” and lenders would not change what they think of your credit record.
Different CRAs have different scores
It has always been confusing that the three major Credit Reference Agencies (CRAs) each assess your credit score on a scale with a different maximum:
- Experian is 999.
- Equifax was 700, now it’s 1000.
- TransUnion is 710.
You might think that now Equifax’s maximum is almost the same as Experian, this means that your Experian and Equifax scores will be almost the same so you only have to check one of them… but that is wrong.
The most important factor in calculating your credit score is your credit history. But many creditors don’t report to all three CRAs. So you could have a good score with one CRA and a poor one with another.
If you want to be sure what your credit record looks like, you have to check reports covering all three CRAs. See The best ways to check your credit ratings for my recommendations – there are free reports for each of the CRAs.
I asked TransUnion if they had any plans to change from their current 710 maximum. Kelli Fielding said:
“If, in the future we felt there was a potential benefit in changing the current scoring model we would look into that but it’s important that any changes take into account the broader discrepancies in how different credit reference agencies and lenders use the data provided. Without careful consideration and planning there could be a risk of confusing consumers by suggesting the scores are the same if the meanings are not.”
Why did Equifax do this?
I have asked Equifax this – so far they haven’t replied, so the following are my thoughts.
700 always seemed like a strange number, so perhaps Equifax just wanted a more sensible one? But making this sort of change is going to be confusing for customers during the transition, so there probably has to be a better reason than that.
My guess is that Equifax wanted to change, not because of the new number at all, but because changing the numbers gave them an excuse to change those band names and ranges. This looks like a pure marketing move to me.
Consumers often ask “Which is the best CRA/credit report?”
To which the correct answer is they are all much the same but they have different data, so you need to check them all.
But most people only check one credit report covering one CRA…
Reports using Equifax’s new rating labels may simply look more friendly as they are using more positive terms for most people. And splitting the Excellent band in two may encourage more people in the new Very Good category to apply for more credit to get their score up to excellent again.
Many problems with credit reporting in the UK
The FCA restarted its review of the credit information industry in 2021. The first report is now expected in late 2022.
I think consumers want a system:
- which is simple to understand;
- a single report on their whole credit history;
- where repaying debt helps your credit score; and
- where applying for credit you do not need is not the best way to increase your score.
Funnily enough, more clever marketing by CRAs is not on that list at all.