Your credit score explained

Maybe not now, but there’ll probably come a time sooner or later when you need to buy something on credit — whether it’s a phone contract or a mortgage. Getting your credit score in the best shape possible will help make sure you won’t be disappointed when it’s time to borrow. 

What's a credit score?

Credit scores are a tool used by people to help them figure out whether they’ll likely qualify for products like loans, mortgages, credit cards or phone contracts. It’s important to note that lenders won’t use this score when they make a decision to lend to you. Each lender will actually have their own scoring system to help them decide. But to give you an indicator of how likely you might be to get approved for credit, each of the Credit Reference Agencies give you a credit score. And it’s helpful to know this before applying for credit.

In the UK, there are three main Credit Reference Agencies: Equifax, Experian and TransUnion. Each of these agencies creates a credit score for you (so you actually have three credit scores, not just one).

Your scores are influenced by factors in your credit report. Lenders like applicants who are ‘low-risk’ which means that the risk that an applicant won’t pay them back is low. So the higher your credit score, the more likely you are to get cheaper rates.

What affects your credit score?

A number of things make up your credit report and impact your credit score:
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• Personal information including your name, date of birth and address
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• A history of credit account payments
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• How much available credit you’re using and your total debts
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• Credit searches carried out when you apply for credit (e.g. a credit card)
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• Public records including electoral roll and county court judgments (CCJs)
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• Financial associates who you have joint accounts with (from bank accounts to utility bills)

Why is your credit score so important?

When you need to borrow money, having a good credit score will indicate that you’re a safer bet for lenders, meaning you’re less likely to be declined. A better score will also help you get better interest rates which will make your repayments cheaper. This could save you £1,000s on things like credit cards, loans and mortgage rates.

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How do you check your credit score?

Like we mentioned, there are three main Credit Reference Agencies in the UK. Differences between your three credit reports can damage your chances of getting credit, so it’s best to check all three.

It’s free to check your credit reports and scores as often as you’d like to and without damaging your scores using the following services:
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• ClearScore (uses Equifax data)*
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• Experian App (uses Experian data)
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• Intuit Credit Karma (uses TransUnion data)
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* For transparency, if you decide to sign up to ClearScore using this link, we’ll receive a small commission.

How do you build your credit score?

Quick wins‍

• Make yourself visible to the system (if you aren’t already) by contacting the CRAs or getting on the electoral roll
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• Fix any mistakes on your credit reports by filing a notice of correction with each CRA or by getting in touch with them
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• Regularly monitor your score and check for fraudulent activity

Building to a better score

• Pay all your bills on time to prove to lenders you can consistently repay your borrowings
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• Limit how many credit applications you make in a six-month period
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• Keep your credit use low to prove you can manage credit

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