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Monzo and NatWest to show credit scores for free – can it help you?

The tools will let customers view and track their credit score in-app

Monzo and NatWest to show credit scores for free – can it help you?

Soon NatWest and Monzo will show customers their credit scores in their apps for free.

Monzo says the feature will be introduced ‘over the next few months’ and NatWest’s version will launch later this month.

Here, we look at how the new tools will work, why banks are offering the service, and other ways to track and improve your credit score.


Why is your credit score important?

Your credit score is a representation of how creditworthy you are – and is based on the information in your credit report.

It’s meant to give you an idea of how banks and other lenders will view your eligibility as a potential borrower.

Keeping an eye on it and working to improve it will help you when it comes to applying for products such as credit cards, loans, mortgages and overdrafts.

Monzo, for example, will use the score to determine your overdraft interest rate.

Which credit score will you see?

Confusingly, you don’t have one universal credit score – there are different scores based on your credit report with the different credit agencies.

The UK has three main credit scoring agencies: Equifax, Experian and TransUnion.

Monzo and NatWest’s tool will show customers their TransUnion score.

In Monzo’s case, the score will be available in-app alongside the ‘key factors’ that influenced your score that month, and a summary of everything that has affected it.

The bank shared an example of a credit score screen warning a user that they haven’t registered to vote, but praising them for using less than half of their available credit.

Source: Monzo

The feature is also slated to track how your credit score changes each month to give you an idea if you’re making progress.

To use the NatWest feature, customers will need to opt in through a ‘quick and easy process’ that will take a matter of seconds.

Why are the banks doing this?

NatWest says it’s introducing this feature to increase awareness and help customers build financial capability.

Which? research last year found that nearly four in 10 people had never checked their credit report.

The information on your credit report is updated monthly, so it’s good practice to check it every month to spot any inaccuracies or actions that have impacted your score.

Having your credit score in front of you every time you use your banking app is a good way to encourage this.

But bear in mind it’s likely that banks could use your score to promote products you will be eligible for.

Monzo has recently said it will use credit scoring to determine a customer’s overdraft rate and the bank is slated to offer other credit options such as loans.

How else can you check your credit score?

Monzo and NatWest will be joining Royal Bank and Barclays, which already offer in-app access to credit scores. These are free, apart from Barclays which charges £5 a month.

But if you’re not a customer, there are other ways to check your credit score.

You can sign up for accounts with each of the main credit agencies to check the scores they have for you.

To see the TransUnion score that Monzo and NatWest customers will see, sign up for TransUnion’s free Credit Karma service. For Equifax, use ClearScore, and for Experian, make a free Experian account or join the MoneySavingExpert.com Credit Club.

Premium credit report services

You have a legal right to access your credit report for free.

But credit scoring agencies also offer paid services, which give you full access to your credit report and ‘credit-monitoring’ features – such as alerts when your score changes.

Experian’s is £14.99 a month and Equifax’s is £7.95. A CheckMyFile membership (£14.99 a month) will show you everything Experian, Equifax and TransUnion know about you. All three of these services have free 30-day trials.

What counts as a good credit score?

Viewing your credit score in a banking app will be meaningless if you don’t know if your score’s any good.

Lenders don’t tend to set hard and fast rules about the exact credit scores they need to see from customers, but generally the better your score, the more likely you are to receive credit.

The problem is, each agency uses a different scale, which could cause confusion if you mix them up. For example, a 710 score on Experian’s scale is ‘Poor’, but on TransUnion’s it’s ‘Excellent’.

Here’s how different credit agencies’ scoring bands work:

Equifax

Score Band
0-279 Very poor
280-379 Poor
380-419 Fair
420-465 Good
466+ Excellent

 

Experian

Score Band
0-560 Very poor
561-720 Poor
721-880 Fair
881-960 Good
961-999 Excellent

 

TransUnion

Score Band
0-550 Very poor
561-565 Poor
566-603 Fair
604-627 Good
628-710 Excellent

 

What affects my credit score?

Credit agencies have been secretive about what precisely impacts someone’s score in the past.

When Which? launched an in-depth investigation into credit scores, only Experian was willing to share examples of activities that would affect your score and the number of points it would typically add or subtract.

You can read the full credit scores investigation here. But a few examples include keeping your credit card balance below 30% of your limit (+90 points) and missing a repayment on a credit card or loan (-130 points).

You can even lose points for actions that don’t necessarily seem negative, such as opening a new bank account with an overdraft in the past six months (-40 points).

How can you improve your credit score?

If you’re worried about a low credit score, don’t panic. There are ways you can boost your scores, and therefore your perceived creditworthiness in lenders’ eyes.

Here are a few steps you can take:

  • Register to vote it’s not really anything to do with money, but lenders will use it as a kind of proof of address.
  • Don’t use too much credit it looks good to have plenty of credit left over – if you’ve used too much, lenders might think you’re bad at managing money.
  • Correct mistakes on your credit report check your reports with all of the main agencies for mistakes or inaccuracies. You can get in touch to correct them and they should investigate.

Read our guide on how to improve your credit score for more helpful hints.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

Categories: Credit cards & loans, Money

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