Quote from VATcal on 24/03/2024, 16:54

Your credit score is a vital number in the UK. It reflects your history of borrowing and repaying money, and lenders use it to assess your creditworthiness. A good credit score can open doors to better loan rates, mortgages, and even mobile phone contracts. On the other hand, a poor credit score can make it difficult to borrow money or secure the best deals.

What is a credit score?

A credit score is a numerical representation of your credit history. It's based on information held on your credit report by credit reference agencies (CRAs) such as Experian, Equifax, and TransUnion.

What's on a credit report?

Your credit report contains details about your borrowing history, including:

• The types of credit you've held (e.g., credit cards, loans, mortgages)
• Your repayment history (whether you've made payments on time or not)
• The amount of credit you currently have outstanding
• Any defaults or County Court Judgments (CCJs) you may have

How are credit scores calculated?

The exact way credit scores are calculated is proprietary information, but CRAs typically consider the following factors:

• Payment history: This is the most important factor, accounting for around 35% of your score. Missed or late payments will have a negative impact.
• Credit utilisation: This refers to the amount of credit you're using compared to your total credit limit. Aiming for a utilisation ratio below 30% is ideal.
• Length of credit history: A longer credit history with responsible borrowing can positively influence your score.
• Types of credit: Having a mix of credit products, such as a credit card and a loan, can be beneficial.
• Recent credit applications: Making multiple credit applications in a short period can lower your score.

What is a good credit score in the UK?

Credit score ranges can vary slightly between CRAs, but generally:

• Above 900: Excellent credit
• 800-899: Very good credit
• 700-799: Good credit
• 600-699: Fair credit
• Below 600: Poor credit

How to improve your credit score:

• Make your repayments on time: This is the single most important factor.
• Register on the electoral roll: Being registered helps lenders verify your identity.
• Reduce your credit utilisation: Pay down existing credit or increase your credit limit.
• Don't apply for too much credit at once: Space out credit applications.
• Get on a credit builder credit card: These cards are designed to help people with no or limited credit history build a positive score.
• Check your credit report regularly: Ensure the information is accurate and address any errors.

Where to get your credit score?

You can obtain your credit report for free from each of the three main CRAs. There are also a number of websites and lenders that offer free credit scores, but be wary of any that require payment for additional services.