Why should I understand my credit score?

Lenders use your credit score to decide how reliable you are at borrowing and repaying money.  It can affect whether you're approved for credit; and how much borrowing could cost you.

What is a credit score?  

A credit score is 3-digit number lenders use to work out how likely you are to repay any money you borrow. It's based on your financial history and applies to things like mortgages, credit cards, and loans. 

Lenders use your credit score to decide: 

• Whether to approve your application to borrow money.
• How much to lend you.
• What interest rate to offer. 

How can I check my credit score?  

You can check your credit score for free through credit reference agencies. In the UK there are three main agencies:  

• Experian, Money Saving Expert Credit Club 
• Equifax, ClearScore
• TransUnion, Karma

What does my credit score mean?  

Credit scores are usually rated on a scale of poor to excellent.

• A poor credit score may mean lenders think of you as higher risk. This could make it harder for you to get an application approved, or you might be offered credit with a higher interest rate (which would mean borrowing will cost you more).  
• An excellent score tells lenders you're more likely to repay on time. This makes it more likely you'll be offered better deals or higher credit limits.  

How do I improve my credit score? 

Why it matters 

Improving your score could help you:

• Access better deals
• Qualify for lower interest rates
• Improve your changes of being approved for a mortgage or a loan

What can I do? 

You may want to improve your credit score before applying to lenders. There are some steps you can take which could help improve your score: 

• Pay all your bills and repayments on time. 
• Check your credit report for any mistakes and get them corrected. 
• Register to vote at your current address.  
• Avoid making lots of credit applications in a short time.
• Use some, but not all, of your available credit each month.
• Close any old or unused credit accounts if you no longer need them. 

What affects your credit score? 

Several things can impact your credit score, including: 

• Having little or no credit history. 
• Missing payments or paying late. 
• Making lots of credit applications in a short space of time.
• Not updating your address on the electoral roll after moving. 
• Using all your credit each month.
• Holding multiple unused or dormant credit accounts.