How do I know if my credit score is good?
A good credit score usually means lenders will offer you better deals and lower interest rates. But what is a good score and how can you improve yours?
What is a credit score?
A credit score is a number which indicates how likely you’ll be accepted for credit. Your credit rating is important because it will determine if you’ll be able to borrow money or not. The better your credit score, the easier it will be to apply for a credit card and to take out loans and mortgages.
What is a good credit score?
In the UK, the three main credit rating agencies - Equifax, Experian and TransUnion - all have different ranges for their credit scores. Because of this, there isn’t a number that can be said that represents a good credit score. However, simply speaking, the higher the number on the credit rating agency’s range, the better the credit score.
Experian scores run from 0 to 999 and a good score is anything from 881. With Equifax, scores run from 0 to 1000, with anything over 531 considered good.
Do I have a good TransUnion credit score?
Our Credit Monitor service uses credit information from TransUnion, where scores range from 0 to 710 and a very good score would be anything from 604 and above.
The following table shows the range of Credit Monitor’s scores and what they mean:
How is my credit score calculated?
When you apply for a credit card, loan or mortgage the lender calculates your credit score based on your credit report, details on your application form, plus any information they already have about you (if you’re an existing customer, for example).
This is what used to determine your credit rating:
Payment history: If you consistently pay your bills on time, this can strengthen your credit score. On the flipside, if you don’t keep up with your payments your credit score will go down. Late payments, CCJS, bankruptcy and accounts in arrears are considered negative marks and can stay on your file for up to seven years.
Credit utilisation ratio: Your credit utilisation ratio is expressed as a percentage and is calculated by dividing the amount you are borrowing by your credit limit. A lower utilisation ratio is usually better because it shows you’re not financially stretched.
Length of credit history: If you have no credit history, this can contribute to a low credit score as lenders don’t have anything to determine how well you use credit. Conversely, a long history of using credit cards responsibly can give you a good credit score.
New credit: When you apply and open a new account, your credit history is reviewed - which leads to a ‘hard search’ on your credit file. These ‘hard searches’ show up on your file and other lenders can see them. If you have lots of searches on your file in a short space of time, it can lower your credit score because it could indicate to lenders that you’re desperate to borrow and keep getting turned down.
Type of credit: Having a mixture of credit accounts, such as cards, loans and a mortgage, can improve your score. This is because it shows lenders you can use credit responsibly. But this doesn’t mean you should take out a loan just to boost your rating.
What are the benefits of a good credit score?
A good credit score signals to lenders that you’re a responsible borrower. That means it can be easier to take out credit cards, loans, mortgages and mobile phone contracts.
Here are some of the benefits of a good credit score:
The ability to borrow more if you need to: Lenders will typically grant higher credit limits
Lower interest rates: Every pound borrowed will be less expensive to pay back
More options: The best deals on credit cards, loans, mortgages and even current account overdrafts are usually offered to those with the highest credit ratings
How can I improve my credit score?
While there is no quick fix for improving your credit score, there are various ways to nurture your rating over time. Here are our top tips:
1. Register on the electoral roll
One of the easiest ways to boost your score is by getting on the electoral roll. It’s free to register on the electoral commission website.
2. Demonstrate financial stability
Perhaps the best way to improve your credit rating is to manage your debts well. Don’t miss any monthly repayments, stick to the payment deadline, and stay within your credit limit.
3. Check your credit report annually
Review your report regularly to check all the information held about you is correct and amend any errors if you spot them.
4. Close old accounts
You might owe nothing on a card, but the lender will look at all your available credit lines before it makes a decision on your application.
5. Cut financial links with previous partners
If you have any joint financial products they might influence a lender’s decision. Ask credit rating agencies to add a ‘notice of disassociation’ to your file if you have cut ties with an ex-partner.
6. Consider a credit builder card
Prove you can manage your debts sensibly and it should grow your credit score. Interest rates on credit cards for low credit scores are generally high so only consider this option if you can keep your borrowing under control.
What if I have bad credit?
You may have a bad credit score for a few reasons. It could be you’ve missed payments or defaulted on what you owe in the past. Alternatively, it may be that you’ve never applied for credit before (if you’ve just turned 18, for example) or have just arrived in the UK, so haven’t had the chance to build up a credit history.
If you have bad credit or a low score, you may have to accept that you will have less choice of products when it comes to credit cards, loans and mortgages, until you’ve built up your score. You’re also likely to be offered a lower credit limit and deals with a higher interest rate.
You do have options though. There are credit cards designed for people with bad credit. These are called credit builder cards and allow you to show you can act responsibly with your finances to help build your credit rating.
How to keep track of your credit score
You can also request a free copy of your credit file from all three credit reference agencies – TransUnion, Experian and Equifax. It’s worth checking the information held on you by all three companies because they're likely to be slightly different.
The Consumer Credit Act gives you the right to obtain your full statutory credit report at any time for free, either online or by post.
If you spot a mistake on your file, contact the relevant agency and ask for a correction, explaining why it is wrong and supplying any appropriate supporting evidence.
Other helpful guides
For more information about managing your credit score, have a look at more of our useful guides, including...
Check your score with MoneySuperMarket
Even if you already know your credit score our free credit monitor service is a useful tool which can help you keep on top of your credit history and rating, and boost it as high as possible.
It’s quick and simple to use and can give you an up-to-date credit score and provide tips on how you can improve it.