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Managing Your Money
Understand Your Credit Score

Learn about credit scoring

Understanding your credit score

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What is a credit score? Open in new window

Improving your credit score Open in new window

Our borrowing options Open in new window

Common questions Open in new window

What is a credit score?

Banks and other lenders use a credit score to decide how likely you are to pay them back. Your score's based on how you manage your finances. It's like a financial footprint that shows if you’ve missed any bills for example.

The higher your credit score the better your chances of getting a loan or mortgage. A higher score might make it easier to borrow more money at a better interest rate.

Credit scores are one factor used in making the decision to lend money. Lenders will also look at your income and outgoings.

How is a credit score calculated?

Before you borrow money, lenders usually request a credit score assessment. This information will be from one or more credit reference agencies. There are three main UK credit reference agencies - Experian, Equifax and TransUnion.

Each lender will have its own method of calculating your credit score with similar data. The score will work out if your request meets their lending requirements.

What can affect my credit score?

There are some general rules about what could affect your credit score. Some things that could affect you score are:

How much money you owe lenders
Have you missed or been late with repayments?
Have you broken the terms of previous credit agreements?
Do you often go over your credit limit?
How often do you withdraw cash using your credit card?
Have you applied for credit too often in a short space of time?

But not all checks depend on your finances. To improve your credit score you should also consider:

Are you on the electoral roll?
Do you move house a lot?
Have you a joint account with someone with a bad credit record?
Are there are any errors on your credit history file?

Tips to improve your credit score

There are lots of ways to improve your credit score. Here are a few tips:

Get on the electoral roll

If you’re not registered on the electoral roll, make sure you register as soon as possible. This helps lenders confirm your name and address, so your credit score will increase as a result.

If lenders can’t confirm your details on the electoral roll, they may ask for other forms of identity. This can delay your application, so registering to vote could save you time.

Review any accounts that you don't use

Before closing any accounts you should consider:

how many accounts do you have
what are the charges on the account
what do you use the account for
does the account impact your credit score

Closing accounts could save you money in fees or reduce the risk of fraud on those accounts.

But closing older, well managed accounts might bring your score down. Having long established accounts with a provider shows stability. It can also be positive if you have accounts where you don't use all the available credit limit.

Check your credit report

Regularly check your credit report and review what’s on it. Let the credit reference agency know of any errors and dispute any inaccuracies.

Pay bills on time

Always try to make at least the minimum payment on time for any money you've borrowed. Missing regular payments to lenders can go on your credit report. This will lower your credit score.

Consider setting up Direct Debits for things like a phone contract or credit cards. This is a good way to help pay bills on time.

Don't apply for credit too often

Applying for credit too often can have a negative effect on your score, even if successful. Try to space out applications, even for car insurance and phone contracts.

Stay within agreed credit limits

A credit card can actually help to increase your credit score when used in the right way. Make sure you make all your repayments on time and stay within your credit limit. Over time, this will show lenders that you are reliable and help to improve your score.

Be careful, poor management of your credit card can lead to a drop in your credit score.

Want to explore our borrowing options?

We know it can be difficult deciding which type of borrowing best suits your needs. To help, we’ve summarised the options for you to compare and contrast.

Compare our borrowing options Open in new window

Common questions

How do I get my credit report?

You can request a copy of the information a credit reference agency holds on your file. You’ll need to give them your title, name, date of birth and address.

Further details are available on the Information Commissioner's Office website.

What's a good credit score?

There are three main UK credit reference agencies – Experian, Equifax and TransUnion. Each agency has different scales to measure credit scores. One agency could consider 700 a 'poor' rating while another considers it 'excellent'.

You can get a free, independent score from each credit reference agency.

Does it matter how late payments are?

It can take some time to recover your credit rating from a missed repayment.

Try to make your repayments on time and recover accounts you’ve missed payments on. You could speak to your lender or a debt charity for support to help make your repayments.

See what support we can offer you

How do credit limits affect my credit score?

If you have a credit card or overdraft, using all your limit suggests you may have financial issues. This could have a negative effect on your credit score.

While higher credit limits can help improve your credit score, only apply for what you can afford.

What’s the difference between hard and soft searches?

A soft credit search happens when you request a quote for credit or use an eligibility checker tool. Soft searches don't have an impact on your credit score. You will be able to see if any lenders have performed a soft search on your credit report.

A hard credit search happens when you make a full application for borrowing. They're saved on your credit report and can boost or lower your score. Hard searches are visible to other lenders on your credit report.

Can I use my credit score to identify fraud?

Large, unexplained changes to your credit score could be a sign of fraud. Keeping an eye on your score is a great way to keep on top of your financial health.

More about protecting yourself from fraud