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What affects your credit score?

Understand what causes your credit score to change

published: 18 February 2022
Read time: 5 minutes

Your credit score determines whether you’ll be offered the best deals for mortgages, loans and credit cards, so knowing how your financial decisions affect it can be very useful

Why is it important to know my credit score?

If you know your credit score it can help you understand how lenders make decisions about you as a borrower – and crucially whether you’re likely to be accepted or rejected.

If your credit score is low, you can also start to explore why that is the case and take steps to improve it. This should put you in a stronger position to make applications for credit in the future.

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Where can I get my credit score?

You can check your credit score for free with our Credit Monitor service. 

Credit Monitor uses information from credit reference agency TransUnion to calculate your credit score, and will also give you helpful, personalised hints and tips on how you can boost your rating.

It will also keep a close eye on your credit file and let you know about any suspicious activity - such as someone applying for a credit card in your name, so you can look into it quickly and stop any potential fraud. Find out more in our Credit Monitor FAQs.How do lenders use credit scores?

Lenders give you a credit score based on their own criteria. They’ll set a minimum score you need to reach to be eligible for the credit you’re applying for.

If you score under a lender's threshold, it may decide not to lend you the money, or it may charge you more to do so. Some lenders specialise in loans for riskier customers and may offer credit where another bank might not.

Lenders don't have to tell you what your score is or how they worked it out – but they should give you a basic explanation of how scoring works, and whether your application has been refused because of your credit score or your credit report. They should also tell you which agency they used, so you can correct anything that is wrong in the report.

What are the main factors that affect my credit score?

Several things will impact on your score, including:

  • Your payment history. Whether you pay on time has the biggest impact on your credit score. Try to avoid missing any payments as this can stay on your credit report for up to seven years

  • How much you owe. The key factor here is how much of your available credit you are using. This is called your credit utilisation ratio by lenders. It gives lenders an idea of whether you live comfortably within your credit limit or you’re already stretched financially

  • Length of credit history. Lenders will look at how long you’ve held active accounts. The longer you’ve had credit accounts that you’ve used responsibly, generally the higher your credit score

  • Credit mix. If you have shown you can handle different types of credit, such as a mortgage, car loan and credit card, this can give your score a bump up

  • New credit. If you’ve made a lot of applications for credit or opened a number of new accounts recently, you’re likely to be seen as a greater credit risk. That said, the credit agencies are getting better at recognising that customers shop around and that this activity shouldn’t always be marked down as a negative

What will negatively affect my credit score?

Knowing what can harm your score can help you avoid the problems. The main red flags on your credit file are:

  • Late or missed payments

  • County court judgements against you

  • Using all your available credit every month

  • Not being on the electoral roll 

  • Making too many applications in a short period

  • Not closing unused credit accounts

  • Not having a long credit history* 

*This might be unavoidable if you are young, for example, and have not had a credit card or loan before. But there are things you can do to start building a credit history.

What happens if I have no credit history?

If you have no credit history, either because you’ve just turned 18, you’ve just moved to the UK, or you’ve simply never needed to borrow money before, then you’re likely to have a low credit rating. 

This means that when you apply for a financial product you might not receive the best rate or could even be rejected. The good news is that it can be straightforward to start building your credit history. Credit builder credit cards are designed for customers with low credit scores and little to no credit history. 

They work in the same way as other credit cards but tend to be more accessible to those with no credit history. They usually have much lower credit limits, typically starting with just a couple of hundred pounds for example, and the interest rate will be higher than on a standard card. You’ll also face high interest rates and charges if you miss a payment. But used responsibly they can help you build up your credit score.

Find out more about credit cards and the pros and cons before you apply. 

How can I improve my credit score?

There are lots of ways to boost your credit score – some are quick and simple, others could take more time. Here are some places to start...

Register on the electoral roll. A quick and straightforward way of giving your credit score a boost. If you’re currently not on the electoral roll, or you’re moving house, make sure you register or re-register as soon as possible.

View your credit report. You can check it for mistakes, add notices of correction or notes explanation that companies can view before deciding whether to lend.

Pay bills on time. From gas and electricity to council tax and credit cards - a good tip is to set up direct debits so you never miss a bill payment. 

Build your credit history. If you’ve not applied for credit before you’ll have no proof you can borrow responsibly. A credit builder credit card could help here and start you on the path to a stronger credit rating.

Close unused credit card accounts. Consider shutting down card accounts you no longer use. If you have access to a lot of credit – even if you never use it - it could be a concern to potential lenders.

Which factors don't affect credit scores?

While there are plenty of things that do impact on your credit score, there’s also a lot of misinformation around about credit ratings. Here are some of the most common myths…

  • Checking your credit score. Accessing your credit file and score doesn’t negatively affect it. You can check your score for free and as often as you like with our Credit Monitor service

  • Being denied credit. Your credit report won’t show whether your application for credit was accepted or declined. It will record any hard enquiries – although they only last for a short while

  • Changes in income. If you change job and get a pay rise – or you take a cut in pay - it won’t have any impact on your credit score either way. Where a change of income can help is if it allows you to clear debts or stops you missing bill repayments

  • Personal information. While your credit report includes your name and address, it doesn’t identify race, gender, marital status, qualifications, religion or political views

Check your credit score with Credit Monitor

It’s quick and simple to check your credit score online using our free Credit Monitor service. 

Credit Monitor gives you access to your credit report and credit score, meaning you can look at it as often as you want and keep tabs on the changes. It will give you hints and tips on how to boost your credit rating – and also show you where you’re doing things right.

Your credit score and the information in your report will be updated monthly, so it’s advisable to check it regularly, in the same way you might with your bank statements or utility bills.

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