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Borrowing power vs credit scores

Apr 25, 2023

In today's world, our financial health is largely judged by our credit score. An ‘excellent’ or ‘good’ credit score can help you get approved for loans and credit cards, while a ‘poor’ or ‘bad’ credit score can limit your borrowing power. But what’s the difference between borrowing power vs credit score? Loqbox has the answers.

What is borrowing power vs credit score?

In simple terms, borrowing power refers to how much money a creditor is willing to lend you, while your credit score is a reflection of your past payment history and creditworthiness. While these two factors are related, they’re not actually the same thing. So, what’s the difference between borrowing power vs credit scores?

Credit scores

Credit scores are a simple way of summarising your credit reports, including how you’ve managed the credit you’ve borrowed in the past. 

When you want to apply for credit — for example by getting a mortgage, a personal loan, or by taking out a credit card — the lender will do a hard credit check on you. This basically just gives them an idea of whether or not you’re deemed as high risk and how likely it is that you will be able to pay them back.

It’s important to say that lenders don’t look at your credit score. That’s just to give you a quick view of your credit report and how the lender would likely perceive your credit application.

Instead, lenders check your more detailed credit report and will consider your affordability.
You can find out the difference between credit reports and credit scores here. But you’re more likely to be approved for credit with a good score than with a lower number.

You also have more than one credit score. They’re calculated by the top three credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion. And each one uses a different system to generate their scores. If you don’t know what your credit scores are you can check all of them for free and as often as you’d like to without impacting them, using these services:

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.

Borrowing power

While your credit scores are specific to you, reflecting your credit history and how you manage your money over time your borrowing power reflects more than your creditworthiness. It also takes into account changes in the credit marketplace. The score is between 1-10, with higher numbers being better than lower ones.

Borrowing power is connected to live market data. For example, when lenders take certain products off the market or make changes to their approval systems, they can alter their acceptance rate of credit applications based on factors such as age or salary. Therefore you’re more likely to see regular fluctuations in your borrowing power. 

So if you’re wondering: is it possible to have an ‘excellent’ credit score but a low score for your borrowing power? Unfortunately, the answer is yes.

Mainly, this is because borrowing power scores relate to things out of your control. But if your credit score is in good shape it will always help your chances. And that’s something you can control! 

What’s a good target credit score if you’ve never borrowed?

What if you have never borrowed before? Does this mean you have no credit score and cannot borrow money? No, not necessarily. 

If you’ve never taken out a loan or credit card, you may have a low credit score as there’s no information to base it on. But there isn’t a magic number for your credit score if you’ve never borrowed money before.

However, even if you don’t want to borrow money now, you can still start to build your credit score ready for the future. Loqbox Grow could be a great option for increasing your credit limit and building a credit history. It’s just £2.50 a week to get started with a Loqbox membership.

Does borrowing money affect credit scores?

Yes, it does. Whenever you borrow money, lenders report your payment history to the credit reference agencies, and that data is then used to calculate your credit score. 

How often you borrow and how well you repay can also either positively or negatively impact your credit scores. But as long as you make payments in full and on time, borrowing can actually boost credit scores!

How much can I borrow with a 600, 700 or 800 credit score?

There’s actually no fixed rule. But higher credit scores generally mean you can borrow higher sums. It’s also important to note that Experian, Equifax and TransUnion calculate their scores on different scales, so numbers can vary from one to the other. However, the below is a rough guide that can help you to understand your scores.

This data is the chart above was checked and updated in June 2022.

How much can I borrow with a 600 credit score?

Looking at Experian, with a credit score of 600 or below, you’re generally considered to have ‘poor’ credit. But if you’re looking at scores from Equifax or TransUnion you’d be in the high end of ‘Fair’ or ’Good’. 

If the lender is using Experian though, don’t panic — you should still be able to borrow money, it’s just that your options might be more limited and you may get charged higher interest rates. 

Something to remember is that 999 is Experian’s maximum score, and typically your scores with all three agencies should be in the same relative range (i.e. all three fall close to the middle column on the chart above). So try not to get hung up on the exact figures if you can, but let’s dive into it. 

How much can I borrow with a 700 credit score?

Again with Experian, you’d still be in the ‘poor’ category at 700 points. Equifax would classify you as ‘very good’ and TransUnion would put you in the ‘excellent’ bracket (woohoo). 

Moving into the ‘fair’ to ‘good’ range should mean that you’re eligible for lots of loans, mortgages and credit cards, and the interest rates should be fairly standard. However, you might still be able to get better deals if you push that credit score up even more!

How much can I borrow with a 800 credit score?

Credit scores above 800 will often be seen as ‘fair’ with Experian, but with Equifax you’d be in the ‘very good’ range (in fact the maximum category is only 11 points away. Congratulations!). TransUnion’s maximum is 710 points anyway. 

Focus more on the ‘poor’, ‘fair’, ‘good’ bands rather than the points themselves.

As you move up the scales for each agency, you should be able to get the best deals from most lenders. 

You should be able to borrow more money at lower interest rates as you go. But be sure to keep an eye on your credit score regularly so you can keep it that way.

How to borrow money without affecting credit scores?

Generally, whenever you borrow, credit scores will be impacted. Although it doesn’t always have a negative impact. If you manage your loans properly and make payments on time and in full, you should see your credit score go up and you wouldn’t want to miss out on that. 

However, if you really need to, there’s a few things you can do:

  • One is to borrow from friends or family if it’s an option, although this won’t be reported to Experian, Equifax or TransUnion, that means it wouldn’t negatively or positively affect your credit scores.

  • 0% interest credit cards can allow you to borrow money without interest, at least for a time period. But they often charge a high interest rate after that promotional period ends, so keep an eye on your T&Cs.

  • Some lenders also offer soft credit checks that don’t affect your credit score, letting you see your eligibility without damaging your credit score. But be mindful of high interest rates which could mean your borrowing costs far more than you originally planned it to.

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