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Credit explained

Credit Ratings, Scores and Bandings Explained 

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Written by  Ella Jukwey
6 min read
Updated: 30 Jan 2024

Credit can be confusing; our guide takes a deep dive into how credit scores are calculated. We also explain the bandings across the different credit reference agencies so you can make sense of your score.

What is credit? 

Credit allows you to make a purchase without paying for it immediately. Buying something on credit can be helpful when paying for a large purchase or if you need breathing space between payments.   

Credit comes in many different forms, such as a loan, car finance, mortgage or a credit card. You can access credit by entering an agreement with a lender. For using credit, you could be charged interest and other fees, such as a transaction fee. 

couple looking at credit statements

What is a credit rating?  

A credit rating (or score) is a three-digit number that’s used to determine if you’re a reliable borrower to lenders. Think of your credit score as a reflection of your financial health. Your credit rating signals to lenders if you’ll be able to keep up with repayments based on how you’ve handled credit in the past. 

How can I check my own credit rating?  

You can find out your credit score by going directly to one of the three main credit reference agencies (CRA): Equifax, Experian and TransUnion.   

It’s important to remember that each CRA uses a different credit banding system, so your credit score will vary depending on which agency you use.  

You can check your credit rating using our free Credit Monitor service. It’s good to know your credit rating, so you have an idea of where you stand with lenders and if you need to improve or maintain it. You should also regularly check your credit file for any errors that could be downgrading your score. 

Why do lenders use credit ratings?  

Lenders use credit ratings to decide whether they’ll lend to you or not. Your credit score indicates to lenders whether you’re risky to lend to and if you’ll be able to keep up with repayments.  

Having a good credit score will make it easier for you to be accepted for credit and benefit from lower interest rates. If your credit rating is low, this doesn’t mean you won’t be approved for credit – however, you should expect higher interest rates and a lower credit limit. 

How are credit ratings calculated?  

The three main credit reference agencies collect your data in different ways to come up with your credit score. Some factors that can contribute to your credit score include: 

Personal details

When you apply for credit, you’ll have to give personal details such as your name, address, salary, and whether you own your home. This information can help to confirm your identity to lenders and give them an understanding of your financial situation. 

Credit history

Your borrowing history will be used by lenders to predict if you’ll make payments on time. If you have a record of consistently making payments on time, this will give you a higher credit score as you’re a reliable lender. If you have a history of missing payments, then this will bring your credit score down and you’ll be seen as riskier to lend to. If you’ve never used credit before and barely have any credit history this can also contribute to a low credit score, because there’s nothing to show to lenders whether you’ll keep up with repayments. 


Every time you apply for credit a mark is left on your credit file. If you make lots of applications for credit in a short space of time, then you’re giving lenders the impression you’re in financial difficulty. Spacing out how often you apply for credit can minimise the impact on your credit score. 

Public records

If you’ve been declared bankrupt before or have a county court judgment, this will negatively affect your credit score. Because of the part public records play in contributing to your credit score, being registered on the electoral roll will give your rating a boost as it verifies your address.  

What factors can impact my credit rating?  

Some of things that can affect your credit score include: 

Credit usage

When you get a credit card, you’ll have a credit limit which is the maximum amount you can borrow. It is widely advised to keep your credit limit to 25% – for example, if your credit limit is £1,000, you should avoid spending more than £250 on your credit card. If you use a lot of your available credit it signals to lenders you’re not in control of your finances. By keeping your credit use in moderation, you’re showing lenders you’re not too reliant on credit. 

Borrowing history

Making credit repayments on time will help you build up a strong credit score. Having a string of missed and late payments will hurt your credit score and make it harder for you to borrow. It’s important to ensure that whatever amount you’re borrowing, you’re able to pay back.   

Who you’re linked to

People you’re linked to financially will show up on your credit report. For example, if you share a mortgage with someone, they’ll appear on your credit file. If the person you have financial connections with has a bad credit score, this can affect your eligibility for credit. Make sure to let the credit reference agencies about anyone you’re no longer associated with. 

Using different types of credit

If you have a variety of credit this shows you’re able to manage different types of borrowing well, such as an overdraft, credit card and mortgage. As always, make sure you’re able to make the payments with each type of credit. 

What is a good credit rating? 

Because the three credit reference agencies use different banding systems, what is a good credit score will depend on which CRA you use. However, the higher your credit score, the better it is. 

There are many reasons why it’s important to have a good credit score. If you have a tip-top credit rating, it’ll be easier for you to be accepted for a mortgage so you can buy a home. A strong credit score also means you’ll be offered lower interest rates when you apply for loans, credit cards and a mortgage. 

Who are the UK’s main credit agencies? 

The UK’s three main credit agencies are Experian, TransUnion and Equifax.   

  • Experian: Experian is the UK’s largest CRA, and their scores range from 0-999. A good Experian score is between 881-960 

  • TransUnion: TransUnion is the UK’s second largest CRA and their scores go up to 710. A good TransUnion credit rating ranges between 604-627 

  • Equifax: Equifax’s credit rating ranges between 0-1000. A score of 531-670 is seen as a good credit rating 

How can I improve my credit rating?   

You can boost your credit score in several ways – here are some steps you can take: 

  • Register on the electoral roll: This is a quick win when it comes to improving your credit rating. Registering on the electoral roll verifies your address and confirms your identity 

  • Make payments on time: Keeping up with payments shows you’re a reliable borrower and can be trusted with credit 

  • Keep credit utilisation low: By not using more than 25% of your credit limit, you’re signalling to lenders you’re not too dependent on credit 

  • Close unused credit accounts:  You may have opened credit card accounts a long time ago that you’ve been forgotten about. Even if you no longer use them, they’ll contribute to your credit limit. A large overall credit limit will lower how much credit is available to you 

Get clued up on credit scores with our guides 

How to improve your credit score with a credit card 

Six common credit score myths busted 

Soft credit checks explained 

Find out your score with Credit Monitor 

You can check your score and credit report for free whenever you like with our Credit Monitor

Keep up to date with your credit score and be notified if there’s any suspicious activity on your file. It’s important to be in the know about your rating, so you know if there’s any room for improvement.  

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