How is your credit score calculated?
Baffled by your credit rating? Here’s the lowdown on how it’s worked out
Key takeaways
Various factors influence credit scores, and credit agencies use a combination of publicly available information and data from lenders to determine your score
Your score can be influenced by those you’re financially linked to (e.g., spouse or joint account holders)
Changes in your credit (new loans, credit cards, missed payments) take about four to six weeks to reflect on your file and affect your score
Remember that credit scores are dynamic and can change based on your financial behaviour, as registered on your credit report
Having a decent credit score is crucial, as this rating determines whether or not you’ll be accepted for a mortgage, personal loan, credit card, or even a mobile phone contract.
If you do get approved, your score will also impact the rate you are offered and the terms of any promotional deal.
How is my credit score calculated?
Credit agencies collate information from the past six years
Credit reference agencies will bring together details about your financial history from the past six years, to work out your score.
This will include your name, current address and previous addresses, and whether or not you’re registered on the electoral roll.
It will also include data from lenders you’ve had credit agreements with in the past six years, and whether you have any missed or late payments.
In addition, agencies will hold information from the courts, such as whether you’ve had a default, County Court Judgement (CCJ), Individual Voluntary Arrangement (IVA), or bankruptcy.
Further, they will have details of anyone you’ve been ‘financially associated’ with, via products such as a joint account or joint mortgage.
There are three main credit reference agencies: TransUnion, Equifax and Experian.
(MoneySuperMarket uses data from credit reference agency, TransUnion, to compile your score and report via Credit Score).
Credit agencies will do their own calculations
In addition to the information collated, agencies will carry out their own credit-scoring process.
The aim is to provide a real-time snapshot of your creditworthiness for lenders.
A lender will look at this information when deciding whether to lend – and at what rate.
They will want to see evidence that someone is a reliable borrower, and use their score from the credit reference agency as part of their assessment.
Lenders will view someone with a high score as less of a risk than someone with a ‘poor’ or ‘bad’ score.
They will be more willing to lend to someone who is low-risk, and to offer them the top rates and preferential terms. Points will be added for responsible borrowing
Payment history
How much you pay on your debts, and whether you’ve missed payments or been sent to collections, will affect your score. If you’re shown to make regular payments on what you owe, your score will increase.
Amount of debt you owe
Credit agencies can see how much debt you owe, and what you owe it on.
This is considered against other factors though, such as the type of debt and your payment history, and whether you stay within your credit limit.
Types of credit and credit mix
Different types of debt such as mortgages, loans, credit cards, mobile phone contracts, and so on, can all affect your score in different ways.
The credit mix may also have an effect – if you’re paying off a wider variety of credit types in a responsible way, that can increase your score, as it implies you’re in control of your finances.
Length of credit history
Your score is affected by how long your file has been active for, and how long you’ve been developing a credit history. If you’re a younger adult or recent immigrant, for instance, you may have a lower score because you don’t yet have enough of a credit history for the credit agencies to judge.
Credit files cover the past six years, so the more data you have from that time frame, the better.
Who you’re financially linked to
The credit score of anyone you have financial ties to – such as a spouse, or someone you’ve shared a mortgage or joint account with – can affect yours, and vice versa.
Recent credit inquiries
When you apply for credit, the lender will make an inquiry on your file. ‘Soft’ credit checks don’t affect your score, but ‘hard’ checks can, especially if there are a lot of them within a short amount of time.
These usually stay on your file for around three months.
How do credit agencies collect information for my credit score?
Credit agencies collect publicly available information, along with data on your credit history as reported by lenders. They may use:
The electoral register
Court judgements
Bankruptcies and insolvencies
Data from lenders, banks, and other financial bodies that you have accounts with
Information you’ve supplied – either directly to the credit agency, or via a product you’re applying for
Enquiries into your data file (e.g. from other lenders)
How often is my credit score updated?
Credit scores are typically updated at least once a month, though it can be more often than that.
Any changes to your credit – such as new loans or credit cards you’ve taken out, or payments you’ve missed – will usually take around four to six weeks to show up on your file and affect your score.
How to improve your credit score
Read our complete guide to improving your credit score for everything you need to know about giving it a boost. Some of our best tips include:
Register on the electoral roll: This helps provide proof of address and confirms your identity
Pay all your bills on time: Set up direct debits for your council tax, energy bill, phone bill, and so on, and make sure you never miss a payment
Check your credit report: Make sure everything is accurate, correct any errors, and investigate info that doesn’t look right
Don’t use all your available credit: If you have a credit card, for instance, use a lower amount of credit than you have available
You can also register with Credit Score – a free service from MoneySuperMarket that lets you check your score and your full report whenever you like.
What is a good credit score?
What constitutes a good credit score depends on the credit scoring agency you're using.
The Experian credit rating agency's 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. TransUnion scores rate from 0 to 710, with anything above 628 deemed to be excellent.
Why should I care about my credit score?
A good credit score will help you secure better interest rates on personal loans, credit cards, car finance deals and more. It should also mean you get a higher credit limit, so you're able to borrow more than if you had an impaired rating / bad credit rating.
Other useful guides
Nurture your credit score with Credit Score
You can check your score and credit report for free as often as you like with Credit Score.
Watch your credit score grow and get alerts if there is any suspicious looking activity on your file – so you can avoid being the victim of fraud.
You’ll also receive regular updates and free tips and advice on how to keep improving your score.