Credit Scores

What credit scores are, what lenders actually care about, and how to improve yours over time.

Beginner

If you're applying for a mortgage, loan or credit card, your credit score could affect:

whether you're accepted;
how much you can borrow;
the interest rate you're offered.

That's why credit scores matter.

What is a credit score?

A credit score is a number that represents how you've managed borrowing in the past.

It is calculated using information in your credit report, such as whether you've made repayments on time and how you've managed previous borrowing.

There isn't one official UK credit score.

The three main credit reference agencies—Experian, Equifax and TransUnion—each calculate their own score using their own methods and numerical scales.

A higher score usually indicates that you've managed borrowing more responsibly, but the scores cannot be compared directly because each agency uses a different scale.

It's also important to remember that your credit score is not the lender's decision.

It is simply one piece of information that helps a lender decide whether to lend you money.

What do lenders actually care about?

When deciding whether to lend you money, a lender is really asking two questions.

1. Are you likely to repay the money?

Your credit score helps answer this question.

If you've consistently made repayments on time, that's generally a positive sign. If you've regularly missed repayments or failed to repay money you borrowed, the lender may think there's a greater chance it won't get its money back.

2. Can you actually afford the repayments?

This is separate from your credit score.

Imagine you earn £40,000 a year and apply for a £1 million mortgage.

Even with an excellent credit score, you won't be approved because the repayments would clearly be unaffordable.

Your credit score helps lenders understand how you've managed borrowing in the past.

Your income and existing financial commitments help them decide whether you can afford to borrow today.

Why does your credit score matter?

A stronger credit score can improve your chances of being accepted for borrowing.

It may also help you qualify for lower interest rates.

For example, two people applying for similar mortgages might both be accepted. However, the person with the stronger credit score may be offered a lower interest rate.

Even a small difference in interest rates can save thousands of pounds over the lifetime of a mortgage or loan.

A weaker credit score doesn't necessarily stop you borrowing altogether.

It may simply mean that you have fewer lenders to choose from or that borrowing costs you more.

What affects your credit score?

Although each credit reference agency uses its own calculations, they generally look at similar information.

Paying on time: Making repayments on time is one of the strongest signs that you've managed borrowing responsibly. Missing repayments or failing to repay money you borrowed can lower your score.

How much you already owe: Lenders also look at how much you already owe. For example, if your credit card has a £5,000 borrowing limit and you've already borrowed £4,500, lenders may see this as a sign that you're relying heavily on borrowing.

Applying for lots of borrowing: Applying for several loans or credit cards in a short period can make lenders more cautious because it may suggest you're struggling to obtain borrowing. Checking your own credit report or credit score does not affect your credit score.

Your borrowing history: Someone who has never borrowed before isn't necessarily a higher risk. However, there is less information available about how they manage borrowing, which can make it harder to build a strong credit score.

How can you improve your credit score?

Make your repayments on time.
Keep your borrowing manageable.
Avoid applying for lots of borrowing in a short period.
Check your credit reports regularly and make sure your basic details, such as your address, are up to date.
Register to vote so lenders can more easily confirm your identity and address.

There are no shortcuts.

A strong credit score is built gradually through responsible borrowing over time.

The key takeaway

A credit score is a summary of how you've managed borrowing in the past. Having a strong credit score can improve your chances of being accepted for borrowing and may help you qualify for lower interest rates.