Are you puzzled about what makes a good credit score in the UK? Don’t worry, you’re not alone. Many people think you need a perfect credit score to borrow money. Having a credit score of 700 and above should boost your chances of getting most loans. If your score is lower, don’t panic. Your credit score can change, and there are steps you can take to improve it.
What is a credit score?
A credit score is a number that shows how well you’ve managed your money, both now and in the past. It gives lenders an idea of how likely you are to repay a loan or credit card. The lower your score, the harder it can be to find loans without paying high interest rates.
Your credit score is worked out by credit reference agencies (CRAs). They use personal and financial information on your credit file to work out the score. Credit reference agencies collect the information from businesses where you have financial accounts.
What is considered a good credit score in the UK?
To have a good credit score in the UK, your score needs to fall in the top ranges set by the three credit reference agencies. These agencies each use their own scoring models to decide if your score is excellent, good, or poor.
This means there isn’t one number that gives you the same rating across all three agencies. Different credit reference agency varies in how they rate scores. The table below shows how the credit score ranges differ between the credit bureaus.
| 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 |
Why a good credit score is important?
A good credit score is important because it shows that you’re good at managing your money. Lenders use it to help them decide if they’ll approve your credit application.
A higher credit score means you’re a low risk borrower. This not only makes it easier to borrow money, but it could also lead to lower interest rates. A poor credit score makes you a higher risk for lenders. This makes it harder to get loans and could lead to you being offered higher interest rates.
How is a credit score calculated?
Credit scores are calculated using the information that’s on your credit report. Credit scoring models use various factors, with some having a bigger impact than others.
1. Your payment history
Your payment history shows how good you are at making payments on your debts. It’s one of the biggest factors that affect your credit score. If you have missed or late payments, it will bring down your credit score. That’s why it’s vital to make sure you’re never late with your credit repayments.
If you haven’t been great with your repayments in the past, there are things you can do to help improve your credit record:
- Set up a direct debit to pay your bills when your wages go in. You’re less likely to miss payments this way.
- If you’ve fallen behind on late payments you’ve missed in the past, catch up as soon as you can. The quicker you get back up to date, the faster your credit score will start to improve.
- Make a budget plan. Budgeting helps you pay important things like your loan repayments, and then only spend what you have left. It’ll be worth it when you see your debts shrinking and your credit score rising.
2. Your outstanding debts
Your existing debt will impact your credit score, as having too much debt can bring it down. It depends on how much debt you have compared to your agreed credit limits. If you’re maxing out your credit cards, it’ll hurt your credit score. But if you only borrow around 30% of your credit limit, this will help your credit score.
3. The length of your credit history
Your credit history builds up over time. If you haven’t borrowed money before, your credit history will be short. With a short credit history, there’s not much past account history to base your credit score on. This will make your score lower.
There are credit cards you can take out that help build your credit score. They’re called credit builder cards. If you take out one of these, always pay back what you spend on it each month. That way you’ll soon see your credit score start to go up. It takes around 6 months to build your credit score, so be patient while yours is improving.
4. The types of credit you use
There are different types of credit available. The most common ones are:
- Mortgages
- Loans
- Credit cards and lines of credit
- Car Leases
If you have a mix of these different types of credit, it shows that you can manage credit well. It helps your credit score – as long as you don’t borrow too much, and you keep on top of your payments!
How to check your credit score in the UK for free
You can check your credit score in the UK for free once every year by signing up with one of the credit reference agencies. There are three main agencies to choose from:
- Experian
- Equifax
- TransUnion
When you get your credit score from these agencies, you’ll find your score won’t be the same with all three. This is because they don’t all use the same measurement scale – our table above shows this. But if your score is rated as good with one agency, it should have a similar rating with the other two. If it’s wildly different, check the information on your credit report to make sure it’s correct.
The other way of getting your credit score for free is by signing up to a credit monitoring service. Martin Lewis’ Creditclub & Clearscore are two examples where you can get your credit score for free.
How to get started on improving your credit score
If you want to start improving your credit score, there are a few things you can do.
1. Check your credit report for errors
It’s important that you check your credit report to make sure it’s accurate. If it has any errors, raise a data dispute with the relevant agency and get it fixed. You don’t want your credit score to be brought down by a mistake.
2. Make all your payments on time
You can help improve your credit score by making all your repayments when they’re due. If you’ve fallen behind, catching up with your payments can make a big difference. Paying back your debts on time shows lenders that you’re reliable and can manage your money well.
3. Use a credit monitoring service
Credit monitoring services are useful for helping you track your credit score. They not only tell you what your credit score is, but they’ll let you know if it changes. There are several credit monitoring services in the UK. Here are a few suggestions:
- Martin Lewis’ Creditclub
- Clearscore
- Credit Karma
4. Keep your credit card balances low
Keeping your credit card balance at 30% or less of your credit limit is good for your credit score. 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 shows lenders that you’re not desperate for money.
5. Avoid opening new accounts if you don’t need to
Every time you open a new credit account it shows on your credit file. Even though it only stays on there for 12 months, it can affect your credit score. The key here is to try not to make too many applications close together in a short period. If you do, it will hurt your credit score.
What are the benefits of having a good credit score?
There are benefits to having a good credit score. Here are three reasons why it’s worth looking after yours:
- A good credit score helps you get approved when you apply to borrow money. You’ll have more different lenders to choose from too.
- If you’ve got a good credit score, you’re more likely to be offered lower interest rates. Lenders offer better deals to low risk applicants.
- Your credit score is used for more than just loans and credit cards. Landlords and other service providers might check your credit score as part of their decision making process.
Conclusion
In general, a good credit score in the UK must be above 700. But what’s rated as a good credit score will vary depending on which credit reference agency you use. A good credit score is important if you want more lending options. It also helps you get a better interest rate.
There are ways of improving your credit score. Making your payments on time is the most important factor. There are other factors that can affect it which you need to watch for. But it’s best to find out what your credit score is, then do what you can to keep it as high as possible.
FAQs
What is the difference between a credit score and a credit rating?
In the UK, a credit score and a credit rating both measure how creditworthy you are. The main difference is that your credit score is a number, your credit rating is the range within which that number falls. For example, with Equifax, you might have a credit score of 700. In this case, your credit rating would be ‘good’ as it falls between 531 and 810.
What is the average credit score in the UK?
The average credit score in the UK is 798 with Experian. But there are three credit reference agencies in the UK, and they each have their own average credit score with scores ranging widely. To find out if your credit score is average, you’d have to check with each agency. Remember that credit scores aren’t set in stone. If you have a bad credit score, there are things you can do to change it.
What can I do if my credit score is below 600?
If your credit score is below 600, you might have trouble qualifying for some loans. But there are ways of improving it:
1. Make all your repayments on time, including other household bills
2. Borrow below your credit limits
3. Leave gaps between credit applications
4. Use a credit monitoring service to help you track your credit score
5. Register to vote – being on the electoral register helps
Other factors that can help include checking your employment status is up to date and making sure your financial position is accurately reflected in your credit file.
Disclaimer: We do not provide financial services. This guide is for informational purposes only.
