What is a credit score?
Your credit score is basically a number representing how good you are at paying your bills – whether that’s for utilities or forms of credit – on time. The more reliable you are at paying what you owe, when you owe it, and using credit that’s available to you responsibly, the better your credit score.
How does a credit score work?
Your credit score is calculated based on your credit history. This is a record of your financial history including borrowing, applications for credit, payments and addresses spanning back several years.
When you apply to borrow money, for example through taking out a credit card or loan, lenders will want to know if they can trust you to pay them back.
To find this out, they’ll check your credit score and then decide whether to approve your application for credit, how much to lend you and what interest rate to offer.
Having a good or excellent credit score shows you’re good at paying your bills on time. It generally means:
You’re more likely to be offered credit (e.g. a loan, credit card or mortgage) when you apply
You’ll be offered a higher amount than if you had a poor credit score
You’ll be offered a better interest rate than if you had a poor credit score
How do Equifax, Experian and TransUnion's credit scores work?
There are three main credit reference agencies (CRAs) in the UK. They all have their own scoring systems, as follows:
Equifax
Grade | Credit score |
|---|---|
Excellent | 811-1000 |
Very good | 671-810 |
Good | 531-670 |
Fair | 439-530 |
Poor | 0-438 |
Experian
Grade | Credit score |
|---|---|
Excellent | 1121-1250 |
Very good | 1001-1120 |
Good | 861-1000 |
Fair | 641-860 |
Low | 0-640 |
TransUnion
Grade | Credit score |
|---|---|
Excellent | 628-710 |
Good | 604-627 |
Fair | 566-603 |
Needs some attention | 551-565 |
Needs attention | 0-550 |
It’s worth checking your credit score with all three agencies, as they each calculate things slightly differently. There may occasionally be an error on one CRA’s report but not others, and you can apply to have this amended.
Find out how to check your credit score for free.
How is a credit score calculated?
Credit scores are complex and a wide range of factors are used to calculate them, including:
Whether you’ve used credit before
If you haven’t had any credit-based products before, you may not have a credit history, so you’ll need to build this up in order to achieve a good score. Credit-builder credit cards can be useful for this.
Your repayment history
Lenders will look for evidence of you keeping up with repayments if, for example, you’ve got a credit card or mortgage.
If you’re on the electoral roll
Being on the electoral roll is a way for lenders to check that you live at the address you say you do, so it saves time on credit applications which helps lenders.
If you’ve had any bankruptcies, County Court Judgements (CCJs) or Individual Voluntary Arrangements (IVAs)
Major financial events such as these will leave a mark on your credit score and may cause lenders concern over whether you'll be able to make your repayments in full and on time.
Joint finances
People you’re financially linked to, for example through a joint mortgage, will show on your credit report. If they have a bad credit score, it could affect yours too.
Your credit utilisation rate
Your credit utilisation rate is how much of your available credit you’re using. Being close to your credit limits could suggest you rely too much on credit and lower your score.
Missing Buy Now Pay Later payments
Paying for things using Buy Now Later companies such as Klarna or Clearpay won’t affect your credit score, according to Lloyds, but missing payments to them could.
Overdrafts
While dipping into your overdraft isn't always a great idea, using an arranged one and paying it off regularly can boost your score. Managing it poorly can have the opposite effect.
If you don’t already have an arranged overdraft and try to spend more money than you have in your bank account, your bank may allow you to use an unarranged overdraft. However, this could have a negative effect on your credit score and potentially cost more in interest.
Gambling transactions funded by credit
You won’t get a bad credit score from gambling alone. However, if you’ve missed payments because of gambling problems, or if you’ve used a credit card to pay for gambling, it could be a red flag to credit agencies.
What are the benefits of improving my credit rating?
A good credit rating could help improve your chances of successfully applying for credit in the future. A higher score shows lenders that you’re able to manage your finances sensibly and could make repayments on time.
Benefits of a good credit rating:
It could unlock lower rates of interest, which could make borrowing cheaper.
You might be able to get a higher credit limit and borrow larger amounts. This could be particularly useful when applying for a mortgage.
You may gain access to promotional offers, and a wider range of offers and lenders.
It can help you get accepted for a variety of credit products beyond mortgages, credit cards, and loans. For example, mobile phone contracts and car insurance.
What can lower your credit score?
There are several things that can lower your credit score:
Late or missed payments – these will be marked on your credit report, almost certainly lowering your credit score.
Making too many applications for credit in a short time – if you’ve been refused credit, don’t immediately start applying to every other credit card provider. Applications for credit will be marked on your credit report, so many applications in quick succession could negatively affect your credit score.
Getting a new credit card and never using it or using it too much – doing this could also negatively affect your credit score.
A history of large debt or bankruptcy – having a difficult past as a borrower can have a long-lasting effect on your credit score. If this fits your situation, you’ll need to slowly rebuild your credit score over time. Unfortunately, there are no quick fixes.
How can a bad credit score affect me?
A bad credit score can have a significant impact on your personal finances. Here are some ways a poor credit score could affect you:
1. Difficulty getting approved for loans and credit cards
Lenders use your credit score to assess the risk of lending to you. A low credit score can make it difficult to get approved for loans, credit cards, and other forms of credit.
2. Higher interest rates
If you have a bad credit score, lenders may see you as a higher risk and charge you higher interest rates on loans and credit cards. This means you'll end up paying more in interest over time.
3. Difficulty renting or buying home
Landlords often check the credit scores of potential tenants to assess their reliability in paying rent on time. A low credit score can make it challenging to secure a rental property.
If you’re hoping to buy, a bad credit score may make it more difficult for you to be approved for a mortgage. If you’re approved, you’ll likely be charged a higher interest rate.
Is a high credit score better than a low one?
Yes – the higher your credit score, the better. A high credit score suggests you can be trusted to pay back money on time and that you’re a low risk to lenders.
What information do credit agencies have about me?
Credit reference agencies usually have the following information about you:
Basic personal details such as your name and recent address history
The banks, credit card suppliers and utilities providers you use
Your regular payment history
How much credit you have available to you, and how much of it you’re using
Anyone you’re financially connected to, for example anyone you have a joint mortgage with
Whether you’ve had any major negative credit events such as a bankruptcy
You can see what types of data credit reference agencies have about you by checking your credit report for free.
What if there’s incorrect information in my credit file?
If you’re worried that information on your credit report is wrong or out of date you can dispute it. Each of the main credit reference agencies has its own way of handling this:
Equifax – use its online form and select the error you want to report
Experian – get in contact via the online form and select the relevant query from the list. There’s also the option to explain what you think is wrong.
TransUnion – use its consumer enquiry form. Select ‘Dispute’ and write down your query.
FAQs
What is a bad credit score?
Here's what the main credit reference agencies consider a bad ('poor' or 'very poor') credit score based on their own grading systems:
Equifax – 0 to 438
Experian – 0 to 720
TransUnion – 0 to 565
What credit score does an 18-year-old start with?
Nobody starts with a credit score until they start to build a credit history. Ways to build a credit history include:
Opening a bank account
Registering to vote (joining the electoral roll)
Getting a mobile phone contract
These prove you're a UK resident, have a relationship with a bank, and show you're capable of paying bills.
How do you get a credit score?
You get a credit score by beginning to build your credit history. Ways to do this include getting on the electoral register, opening a bank account and using (and repaying) credit.
What to do if you don’t have a credit score
If you don't have a credit score, you could build one by opening a bank account, using a credit card, joining the electoral register and paying the monthly bills.
Why has my credit score changed?
Your credit score is affected by such things as your monthly payments, moving home, applying for and using credit, joint accounts, and missed payments.
If you think there's an error on your credit report, report it to the credit reference agency and apply to get it fixed.
What credit score do I need to get a mortgage and buy a house?
Ideally, you'll want at least a 'good' credit score to get a competitive mortgage deal.
You may still be able to get a mortgage with a poor credit rating, but the deals will likely have higher interest rates and you may not be offered as much.
Looking for something else?
Allie has spent her career helping people quickly understand complicated topics, to help them save money and focus on what matters. With almost 10 years’ experience writing, leading and managing content, she is an expert in personal finance and insurance products.
Ele Clark is an award-winning editor who has held leadership roles at Which? and news-stand publications in London and Dubai. She’s appeared across the press and media, including BBC’s Panorama. With almost 20 years’ experience in personal finance, insurance and consumer journalism, she leads a talented team at Compare the Market, creating insightful, accessible content to help people make informed financial decisions.
Charlie is a senior commercial leader with close to a decade of experience across the UK’s leading personal-finance and comparison platforms. Before joining Compare the Market as Head of Commercial in 2024, he held senior commercial roles at TotallyMoney and MoneySuperMarket Group.
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What our expert says...
"A credit score matters because it influences both access to borrowing and the kind of terms someone may be offered. But it’s rarely about one isolated action; it’s usually the result of repeated habits, which is why small improvements made consistently can matter over time."