When it comes to credit scores, there are a lot of myths and misconceptions. People often think that they need a perfect credit score to get approved for a loan or mortgage. But this isn’t true! In the UK, there’s no such thing as a “perfect” credit score. As long as your score is above 700, you should be approved for most loans.
If you want to know more about what makes a good credit score in the UK, read on. We’ll tell you what affects your credit score and what you can do to improve it.
Table of Contents
What is a Credit Score?
A credit score is a number that reflects how well you’ve managed your money in the past. It gives lenders an idea of how risky it would be to lend to you.
| Your credit score | How risky to lend to you |
| High score | Low risk |
| Low score | High risk |
You can find out what your credit score is by registering with one of the three Credit Reference Agencies (CRAs). We’ve got three main ones in the UK, they are:
- Experian
- Equifax
- TransUnion (formerly Callcredit)
Your credit score with each of these agencies will be different. This is because they don’t all use the same ranges to determine whether your score is good or poor. But don’t worry if the number is different with each agency. If your credit score with one agency is good, it’s likely to be good with the other two agencies too.
What is Considered as a Good Credit Score in the UK?
A good credit score in the UK is one that falls in the upper ranges set by the three main CRAs. These agencies have their own scoring range that they use to rate your credit score, from very poor to excellent. This makes it hard to get one number that fits all three. But in general, a good credit score in the UK is anything above 700.
To find out if your credit score is a good one, you’d have to check with these agencies individually. Our table below shows the ranges each of the credit reference agencies use.
| Credit Score Range | Very Poor/Poor | Fair | Good/Very Good | Excellent |
|---|---|---|---|---|
| Experian | 0-720 | 721-880 | 881-960 | 961-999 |
| Equifax | 0-438 | 439-530 | 531-810 | 811-1,000 |
| TransUnion | 0-565 | 566-603 | 604-627 | 628-710 |
How is a Credit Score Calculated?
Credit scores are calculated using information on your credit report. The following factors have the biggest impact on your score.
1. Payment History
Your payment history is one of the most important factors in determining your credit score. It shows if you’ve paid your bills on time and in full. Your payment history is a good indicator of how good you are at managing debt. It helps lenders assess how likely you are to pay back your loans.
There are a few things you can do to improve your payment history:
- Pay your bills on time, every time. This includes credit card bills, utility bills, mortgage payments, etc.
- If you’re having trouble making ends meet, consider meeting with a financial advisor to create a budget. If you monitor your spending, you’ll see where you can cut back and make savings.
- If you’ve missed a payment in the past, make sure you catch up as soon as possible. The longer you leave it, the more damage it’ll do to your credit score.
Following these simple steps can help you improve your payment history and keep your credit score healthy.
2. Outstanding Debts
Outstanding debts are any money that you still owe to lenders. This could include things like credit card balances or personal loans. Having outstanding debts can lower your credit score. It shows that you’re not managing your finances effectively. Especially if over 40% of your income is used to repay your debts.
To improve your credit score, it’s important that you pay off your outstanding debts as soon as you can. This will show lenders that you’re a responsible borrower. If you’ve got more than one credit card, close one of them down once it’s paid off. It’ll help you get approved for loans in the future.
3. Length of Credit History
The length of your credit history is the third most important factor in your credit score. This is the length of time you’ve been borrowing money.
A long credit history shows lenders that you’re a responsible borrower. It shows that you can be trusted to repay your debts. It helps lenders predict how you’ll manage new debt in the future.
If you have a short credit history, you can improve your credit score by building up a good track record. It takes around 6 months to build your score, so be patient while your credit score starts to improve.
4. Types of Credit in Use
Another important factor in your credit score is with the different types of credit in your credit history. A variety of credit shows lenders that you can keep your money under control.
The most common type of credit is short term loans, payday loans, and credit cards. Other types of credit include instalment loans, such as car loans. With an instalment loan, you borrow a set amount of money. You then make fixed payments each month until the loan’s paid off.
Lending Stream offers short term loans that you pay back in instalments over 6-12 months.
How To Check Your Credit Score in the UK for Free?
If you’re looking for ways to find out your credit score for free in the UK, there are a few options available to you.
- You can check your credit report for free with the three UK agencies – Experian, Equifax, and TransUnion.
- You can sign up online with Clearscore. They’ll give your credit score for free based on information you provide. They’ll also let you know what loans and credit cards you’re more likely to be approved for.
- Some banks and financial institutions offer their customers free access to their credit score. If you’re not sure whether your bank offers this service, give them a call to find out.
Getting your credit score in the UK is relatively easy. If you don’t know what yours is, find out. By knowing what your credit score is you can do what you can to improve it or keep it healthy. Having a good score will help you whenever you want to borrow money.
How to Get Started on Improving Your Credit Score?
There’s no one strategy for improving your credit score. But there are things you can do to help get it to a good score and keep it there. Here are some tips to get you started.
1. Check Your Credit Report for Errors
It’s a good idea to check your credit report regularly to make sure it’s accurate. You can get a free copy of your credit report from each of the major CRAs. If you find any errors on there, dispute them with the agency right away. You don’t want an error to stop you from having a good credit score.
2. Make all Your Payments on Time
Making sure you make all your repayments on time can make a big difference to your credit score. By paying back your debts when they’re due shows lenders that you’re reliable. It shows them that you manage your money well.
If you’ve missed any payments or have been late making them, bring them back up to date as soon as you can. Then always keep on top of them.
3. Use a Credit Monitoring Service
We’ve already mentioned a couple of credit monitoring services – Martin Lewis Clubcard and Clearscore. But there are a few to choose from in the UK.
They’re all good for letting you keep track of your credit score, and they’ll alert you if it changes. This can be invaluable in helping you improve or keep a good credit score.
4. Keep Your Credit Card Balances Low
Keep your credit card balances at around 30% or less of your credit limit. For example, if you’ve got a credit card with a limit of £1,000, you should try to keep your balance below £300. This is worth doing as lenders like to see that you’re not desperate for money.
By keeping your spending under control, it helps your credit score.
5. Avoid Opening New Accounts If You Don’t Need To
As you work to improve your credit score, avoid opening too many new accounts. It can be tempting to sign up for a new credit card with an introductory offer of 0% interest. But opening too many new accounts over short space of time can hurt your credit score.
Every time you apply for credit, a hard check is done on your credit file. This means other lenders can see the applications you’ve made, even if they’re declined. Each application can lower your credit score. That’s why it’s better to only open new accounts when you really need to.
What are the Benefits of Having a Good Credit Score?
There are many benefits to having a good credit score. Here are three reasons why it’s worth looking after yours.
- A good credit score makes it more likely for you to be approved for a credit card or a personal loan. And you’ll have more choice of lenders to apply with.
- When your credit score is classed as good or above, you’re more likely to get a lower interest rate.
- Your credit score is used for more than just loans and credit cards. Landlords and employers can run a check on your credit score as part of the application process. It’s another reason why keeping a good credit score has its benefits.
Having a good credit score is important as it can help you in more ways than one.
Conclusion
In general, a good credit score in the UK is anything above 700. But this number may vary depending on which credit reference agency is used. A good credit score is essential if you want to be approved for a choice of loans and other forms of financing. It also helps you get the best interest rates and terms.
If you want to improve your credit score, your payment history is the most important factor. There are other factors that can affect it which you need to look out for. But the best thing to do is find out what your credit score is, then do what you can keep it as high as possible.
FAQs About Good Credit Score
What is the Difference Between a Credit Score and a Credit Rating?
In the UK, a credit score and a credit rating both measures how credit worthy you are. There isn’t much difference between them.
Your credit score tends to indicate how likely you are to pay your loans. Your credit rating tends to indicate how risky it is for lenders to approve your loan application. Either your score or rating will help lenders assess whether they’ll approve your application.
What is the Average Credit Score in the UK?
The average credit score in the UK is 759 with Experian. But there are three credit reference agencies in the UK and they each have their own average score. You’d need to check with each agency to find out where your credit score falls.
Remember that credit scores are not fixed. Your score can go up or down depending on your financial history and repayment habits.
What Can I Do if My Credit Score is Below 600?
There are a few things you can do to bring your credit score up to over 600.
You can make sure all your payments are made on time.
You can keep your credit card balances low.
You can avoid opening new accounts unless you need to.
You can use a credit monitoring service to keep track of your credit score and see what’s impacting it.
Disclaimer: Any information provided does not constitute financial advice. Please read carefully about the terms and conditions of the credit provider you choose to take out a loan from. Any links to external websites are for reference only and are correct at time of publishing.