If you’ve checked your credit report in the UK, you might have been told that you have a 'fair' credit score. But what does that really mean, and how does it affect your options when it comes to your money matters? Loqbox explores everything you need to know about what a fair credit score is and what it means for your finances.
Did you check all three credit scores?
Your credit scores (and pssst, you have three, not just one) are generated by each of the top three credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion.
They look at your credit report and summarise it with a numerical score to help you understand how a lender may view your credit application. Only you see these scores.
If you don’t know your credit scores, you can check them for free without hurting them using one of these links:
ClearScore (uses Equifax data)*
Credit Club (uses Experian data)
Intuit Credit Karma (uses TransUnion data)
*For transparency, we wanted to let you know that ClearScore pay us a small commission if you sign up using this link.
Generally, the higher your credit score, the more likely you’ll be offered lines of credit, with higher limits and better interest rates. Although your credit score is a number, it will also show a word like 'excellent', 'good', 'fair', or maybe even 'poor'. So, what does it mean if yours is described as a 'fair credit score'?
What is a fair credit score?
Once you know your scores, you can compare them to this credit scoring table. You’ll notice that each of the credit reference agencies we mentioned use a slightly different scoring scale. So ‘fair’ is mid range for Experian (721-880) and TransUnion (566-603), and in a lower bracket for Equifax (531-670).
This data was reviewed in May 2023.
But, is a fair credit score good enough?
It’s hard to say if a 'fair' credit score is ‘good enough’ because it depends on what you want to do with your borrowing. If you apply for a mortgage or car finance, ‘fair’ credit scores could make it more difficult compared to someone with an ‘excellent’ score.
The truth is that with a fair credit score you could be considered a potential risk to most lenders. But don’t panic, there are always options available to you, and you are not cut off from achieving your financial goals.
Let’s take a look at how a fair credit score affects different financial products:
Can I get a mortgage with a fair credit score?
Yes, it’s possible to get a mortgage with a fair credit score, but it may be more difficult. There’s no credit score (or score range) that guarantees a mortgage. Lenders prefer borrowers with ‘good’ or ‘excellent’ credit scores, as they’re considered less risky. But, with a steady income and good payment history, you might still qualify with a fair credit score.
Mortgage providers will consider more than your credit history when deciding whether to accept your application, and at what interest rates. They’ll also check your affordability — how much do you earn, and how much do you have to pay out every month? Do you have children? How much is your deposit?
If you’re successful in a mortgage application with a fair credit score, you may only be offered mortgages with high interest rates. If you can improve your credit score before you apply for a mortgage and get more favourable interest rates, you could save yourself thousands in the long run! So it’s definitely worth getting that score up.
You can read more about credit scores and mortgages here.
Can I get a car with a fair credit score?
Yes, it is possible to get a car with a 'fair' credit score. However, you may be limited in your options and you might be asked to pay higher interest rates on the lease. You may also be required to pay a fee or a large deposit, but that is more likely if you have a 'poor' or 'bad' credit score.
Of course, if you're looking for car finance and your credit score is causing you problems, there are lenders who specialise in car finance for borrowers with 'fair' credit scores. But be prepared to pay those higher interest rates, fees and/or deposits.
You can read more about credit scores and car finance here.
Can I get loans for fair credit scores?
If you're in need of loans for 'fair' credit scores, there will very likely be options available to you. Again, there are lenders that specialise in offering loans to borrowers with less-than-perfect credit. But again, you’ll probably have to pay a higher interest rate than someone with 'good' credit.
You can also look at different types of loans. With a secured loan, you can offer up an asset — like your house or car — as security against your loan. Alternatively, guarantor loans can be accepted when you are able to find somebody — like a friend or family member — who is willing to act as a guarantor for your borrowing.
But as with other forms of credit, lenders will often look at more than your credit history when they decide whether they’ll accept your application. They’ll often consider salary and employment status, and outgoings. Taking it all into account, lenders may decide you’re less risky. However, for the best deals you’ll usually want a better credit score.
You can read more about credit scores and loans here.
What’s the best credit card for a fair credit score?
The good news is that there are credit cards available for those with 'fair' credit scores who want to rebuild their credit. Typically they’ll have low credit limits and high interest rates, but they can help you establish a good payment history. After all, using credit responsibly is a great way to improve your credit score.
Credit-building credit cards are useful for people who either have a low credit score, have a challenging employment status, or for early credit users who haven’t had an opportunity to use credit responsibly yet. By offering high interest rates, the cards can offset the risks in return for allowing you time to build (or rebuild) your credit history.
If you use your credit card sensibly — as in, you make your minimum payments in full and on time every month, and you don’t spend more than about 25% of your available credit — that activity is reported to the CRAs. They in turn update your credit history and recalculate your credit score.
Of course there is also a risk! If you use a credit-building credit card irresponsibly and you miss payments, you could see that your credit score plummets below 'fair' and even into 'poor' or 'bad' territory!
You can read more about credit scores and credit cards here.
What’s the difference between a fair and good credit score?
The main difference between a 'fair' and 'good' credit score is the level of risk lenders think you represent as a borrower of their money. Borrowers with 'good' (or 'excellent') credit scores are considered to be less risky. They have a proven history of making payments on time and managing their credit responsibly.
Borrowers with 'fair' credit scores are not thought of as high risk, but they may still be considered somewhat risky. It is likely that a person with a 'fair' credit score will be able to secure loans, mortgages and credit cards with some lenders but there’s also a chance that they will have to pay higher interest rates, deposits, or find guarantors.
OK, so how can I get a 'good' credit score (or better!)?
While having a 'fair' credit score may make it more difficult to secure loans, mortgages, and credit cards, it's certainly not the end of the world. With a little patience and persistence, you can still find options to help you achieve your financial goals. Or better still, grow your credit score by starting to use credit responsibly. And we can help.
One of the quickest ways to get your credit score from 'fair' to 'good' is by starting your membership with Loqbox. Get access to Loqbox Grow, Loqbox Save and Loqbox Rent, all for just £2.50 a week. You could see your credit score grow by up to 300 points in the first three months using all of three products together.
Improvements to your credit score are not guaranteed.
