Credit score reasons explain the factors that are driving a credit score down. This helps Loans Officers better understand an important indicator of risk.

A credit score is a summary of all the good and bad points within an applicant's credit history.

Get a quick overview of credit scoring, understand the Guage 2 scorecard used in the decision engine and find out what can drive a credit score up or down.

The lower the score the more likely that all four reasons will be shown. This is because each reason describes why the credit score isn't as good as it could be. Therefore, fewer reasons (or no reasons at all) will be shown when the credit score is relatively high (e.g. above 630).

Four reasons are selected from a longer list of factors impacting the applicant's credit score. These are summarised in the table below and detailed in the rest of this article.

The reasons returned are prioritised because they have the greatest negative impact on credit score. There may be other reasons that could be displayed, but only the top four reasons are shown.

For example there may be defaults, CCJs, high revolving credit balances and a lot of recent credit searches. That's four reasons for a low credit score. But not all of these reasons may be returned if the key factor driving score down is relatively high overall balances. In other words there may be five reasons why the credit score is low, but it will be the four reasons with the greatest downward impact that are shown.

However, the credit score reasons that are returned are NOT ranked according to their impact. In the example below, most accounts not being open for long does not necessarily have a greater impact on credit score than there are CCJs and / or insolvencies on file:

This reason is returned when there are missed payments on the account. In such cases the missed payments table will be showing arrears:

The worst payment status will show a number between 1 and 6.
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This reason may also show if there are defaults on file because at some point, before being defaulted, those accounts were in arrears.

When a borrower has typically missed six repayments on an account it is defaulted. Defaults remain on the file for six years. When an applicant has defaults they may be returned as a credit score reason.

In the dashboard if the worst payment status is default then it is likely that one of the credit score reasons will be defaults on file.

County court judgments and insolvencies can have a really significant impact on credit score . If there is any legal action on the account, then these reason codes are likely to be returned. This includes any form of insolvency and county court judgment, even if they have been satisfied or discharged:

This reason is returned when active accounts have been opened recently. Credit scores are higher when accounts have been held for some time.

Recently is typically in the past two years. Paid accounts are ignored. Therefore you may see this credit score reason if a paid account was from some years ago, but the active accounts are more recent:

Current account and all utility accounts are excluded. This means that the reason can be returned even when these accounts that have been open for some time. That's because current accounts without overdrafts and utility agreements do not contribute to credit score as much as instalment loans or credit cards:

If the applicant doesn't have many open (active) accounts this reason may be returned. Credit score goes up when a borrower is managing a greater number of accounts well.

The reason may be returned even when there were active accounts, but these have now been paid. Defaults are not active accounts:

This can also be relative. For example, if an applicant may have paid off 20 accounts in the last six years, but currently only has 3 active accounts, the reason may also be returned.

Current account and all utility accounts are excluded.

This reason may also be returned if the applicant cannot be found at the credit bureau (REF03: Not found). This is because in such cases a lower, generic, credit score is still calculated, but because no accounts are available this reason is returned.

This reason may be returned when this ratio of balance to limits for revolving credit and budget accounts is high. This will be reflected in the indebtedness tab. The reason is more likely to show when more than 75% of limits have been utilised:

This reason may be returned when balances on credit agreements are high, especially when compared to annual income. This will be reflected in the indebtedness tab when the annual debt ratio is typically higher than 60%:

This reason code can also be triggered when when the ratio of balances to limits on revolving credit is high.

This reason means that the applicant doesn't have access to much credit. This may be because they are at credit card or overdraft limits. Consequently, the indebtedness tab will show the applicant has a high percentage of their available limits in use:

However, this reason can also be returned when the applicant has a low credit limit. Or no access to any credit facilities. For example they just have a current account with no overdraft facility:

This reason code may also trigger when the applicant no longer has access to revolving credit facilities. In the case below there is no limit but there is a revolving credit balance because the account is in default:

If someone applies for a lot of credit very recently this can drive down the credit score. Only hard checks will affect the credit score. So called 'quotation' or soft searches do not have an impact.

If this reason code is triggered expect there to have been at least three credit searches in the last three months.

Being on the electoral roll can help improve a credit score. Consequently if an applicant hasn't registered to vote the impact on their score can be negative:

The reason may also be returned the applicant hasn't been on the electoral roll for more than two years, provided it is significantly affecting the credit score:

TransUnion use a system called Cameo, to provide demographic and geographical information about the area in which the applicant lives. These data provide insights into the postcode area, but aren't necessarily directly applicable to the applicant. In other words, they give insight to the local neighbourhood and are likely to (rather than do) reflect the applicant's situation.

A forthcoming development will display more detailed demographic information in the NestEgg dashboard. More details about these credit score reasons will be available from April 2022.

In the meantime there are two credit score reasons associated with demographic data:

The applicant lives in an area where the average age, income or level of employment is lower than average.

The applicant lives in an area where the average house price is lower or the incident of defaults, locally is higher than average.

A financial associate could be a partner or spouse or any other adult living in the same household. A financial association may have been created because a bill is in a shared name. A loan or mortgage might be held jointly. Even a joint (but ultimately unsuccessful) loan application can create the association.

When signing up for a service or applying for credit a borrower will have given the provider permission to create this associate and share data about it. Those data aren't as comprehensive as the information returned about the applicant, but it can have an impact on credit score in some circumstances.

Someone who is financially associated with the applicant has accounts with missed payments. This can drive credit score down because it is assumed that if someone with whom the applicant shares finances has missed payments, the applicant is at greater risk of missing a payment too.

Someone who is financially associated with the applicant doesn't have many active accounts. This can drive credit score down because it is assumed that if someone with whom the applicant shares finances is struggling to open accounts, the applicant is at greater risk of struggling to open accounts too.

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