Between 2018 and 2022, over £23.7 billion was lent to individuals in the UK, meaning the majority of consumers will be familiar with the terms and conditions of a loan agreement, including credit score checks. Despite this, nearly 7 in 10 Brits don’t know what their credit score is.
This isn’t all that surprising as just hearing the term credit score is enough to set most people on edge, but that needn’t be the case. Credit scores are an important factor in a lender’s decision to loan you credit, as they estimate the amount of risk associated with doing so. That being said, if you have been consistent in making repayments and have a strong credit report, you do not need to be worried.
Checking and understanding your credit score is a pretty simple process. Furthermore, if you do find that your credit score is low, there are also plenty of things you can do to improve it, therefore increasing your opportunities for loans and better interest rates.
In this article, we will cover what credit scores and reports are, why they matter, how to check your credit score, and ways to improve it.
What is a credit score and why is it important?
Not to be confused with a credit report, a credit score is a three-digit number that summarises what is in your credit report. A credit report is simply a record of your past credit which is used by lenders such as banks, mortgage providers, and credit card companies to determine how reliable you are in terms of money.
Making sure you have a good credit history will help you in many ways, particularly if you are thinking of taking out a loan or a mortgage. A good credit score will increase your options for products and services and you will likely be offered better rates on them due to a lower risk associated with lending credit to you.
Who compiles credit reports?
The UK has various companies that compile information detailing how well you manage money and credit, called credit reference agencies (CRAs).
There are three main credit reference agencies which are:
- Experian – The UK’s largest credit reference agency which is frequently used by lenders.
- Equifax – A good alternative to check your credit score as it may hold different information on your credit record.
- TransUnion – Previously named Callcredit, TransUnion is the UK’s second-largest CRA.
Each credit reference agency will hold different information about your credit history so it is usually worthwhile doing a comparison across them. This way you can also identify any potential issues or gaps in the records and address them.
What does a credit report consist of?
Your credit report is a historical record of your debt repayment and management, and it typically consists of the following information:
- Personal information such as your name and date of birth, current and previous addresses, details of individuals you are financially linked to, and past employers.
- List of accounts and other financial information, including open loans and accounts along with closed accounts and any missed repayments.
- Public records, which include any filings for bankruptcy or fraud cases.
- Credit inquiries e.g. if you have previously requested your credit report when taking out a new loan.
- Whether you are on the electoral register as this helps confirm your identity.
How is my credit score calculated?
There are five main weighted factors that are used to determine your credit score. It is important to be aware of them so that you can make improvements to your spending habits, thus increasing your credit score.
The factors are as follows:
- Payment history: accounts for 35% of your credit score. Your payment history identifies your consistency with repaying debt and whether you have defaulted on or missed payments.
- Total amount of debt: 30% of your credit score is calculated based on how much of the credit you are eligible for is being used — this is called credit utilisation.
- Length of credit history: accounts for 15% of your score and covers the amount of time you have been using credit for. Usually, the longer you have been using credit, the higher you will score on this factor.
- Amount of new credit: the amount of new credit you have taken out accounts for 10% of your score. Opening multiple new accounts in a short period of time is likely to detrimentally impact your credit score as lenders will associate it with a higher amount of risk.
- Credit mix: accounting for 10% of your score, a credit mix refers to the types of credit accounts you have and use such as credit cards, loans and other methods of borrowing money. Your credit score will usually be higher if you only use a single type of credit.
How do I check my credit score?
There are several websites you can use to check your credit score, each slightly different. Generally, it is best to check your credit score with at least one of the three UK credit reference agencies (CRAs) mentioned previously: Experian, Equifax, and TransUnion. You will then be able to compare across the different agencies to get a well-rounded view of your current credit profile.
It is also advisable to check your credit annually, and before you take out a loan or apply for credit. Doing so will identify where you can make improvements and increase your score by making adjustments to your lifestyle.
Below are the ways in which you can check your credit scores with the main CRAs:
- Experian Credit Score: The agency offers new customers a 30-day free trial of its services whereby you can check your Experian credit report and score and be notified of any changes on your account.
- Equifax Credit Score: Head to their website to access your Equifax credit report and overall score. You will be able to access a free 30-day trial, after which there is a £7.95 per month fee.
- TransUnion Credit Score: Use Credit Karma to access your credit report and score as you will get a more extensive report and it is free.
What does my credit score mean?
Your credit score will be given to you as a number. However, each credit agency uses its own scale to determine how reliable you are in terms of borrowing money — regardless of the agency, a higher credit score is always better.
The three main agencies use the following ranges for credit scores:
- Experian: your credit scores will be between 0-999
- Equifax: scores range from 0-1000
- TransUnion: assigns a score between 0-710
These are then further broken down into five categories that are used to rate your credit score. These are “very poor”, “poor”, “fair”, “good”, and “excellent”. Below are the category ranges for each of the three main credit reference agencies, and what they mean.
| Band | Experian | Equifax | TransUnion |
| Very Poor | 0-560 | 0-438 | 0-550 |
| Poor | 561-720 | 439-530 | 551-565 |
| Fair | 721-880 | 531-670 | 566-603 |
| Good | 881-960 | 671-810 | 604-627 |
| Excellent | 961-999 | 811-1000 | 628-710 |
How do I improve my credit score?
If you are finding that your credit score is hindering your ability to take out a loan or get a good interest rate, here are seven tips to improve your score.
- Make regular payments on time: your payment history accounts for 35% of your overall credit score, therefore keeping on top of bills and other monthly outgoings will dramatically help improve your credit score by showing your ability to manage credit and payments consistently.
- Keep your credit utilisation low: Try to keep your credit utilisation below 30% if you can as this helps lower the risk lenders associate with loaning you credit. For example, if you have access to £2000 of credit, only using up to £500 will make your credit utilisation 25%.
- Build up your history of using credit: lenders look for strong credit history as an indicator of reliability. If you have little to no record, you will likely have a lower score as 15% of your credit score relies on your history of using credit. In order to build up your record, make regular payments over a reasonable amount of time and try to stick to one type of credit.
- Check your credit report for errors: even small mistakes on your credit record such as having the wrong address can impact your credit score negatively. Make sure you check for any typos and other details to make sure they are all accurate.
- Limit new credit requests: this refers to hard enquiries such as applications for new credit or a mortgage. Checking your credit record is considered a soft inquiry and doing so will not damage your credit score. However, multiple hard enquiries in a short period of time are likely to lower your credit score as lenders may interpret them as you being in financial difficulties. Try to limit the number of enquiries you make, only doing so if it is really necessary.
- Keep old accounts in use: using an account long-term is beneficial as it helps bolster your credit history. Additionally, most lenders will favour mature credit accounts with low credit utilisation.
- Join the electoral register: it may seem like a minor detail but joining the electoral register if you haven’t already done so will improve your credit score. This is because it helps lenders identify you and confirm your address, reducing the likelihood of identity theft.