Before you build or rebuild your credit score, it helps to understand how a credit score works. Here, we look at what a credit score is, how it’s worked out and how you can find out why it might be affecting your ability to get credit.
Credit score explained
Your credit score is a number that tells lenders how likely you are to repay them if you apply for a loan, credit card or any other form of borrowing.
Your credit score is based on how you’ve managed your credit in the past. This includes everything from mobile phone contracts to mortgages. The higher your score, the more likely it is you’ll be accepted for credit and get better rates of interest.
We talk about a credit score, but it's important to understand you don't have one single credit score. Each lender calculates it slightly differently depending on what they look for in potential borrowers. For example, even if your credit history has led to a rejection from a mainstream lender, a specialist lender may still consider you.
A high (often known as ‘good’) credit score means you have an improved chance of being offered better products. This usually means you’ll get credit with lower interest rates or added perks, like a 0% balance transfer period. A low credit score means you might have to pay more interest, or you may not be able to borrow at all if the lender thinks you’re too much of a risk.
What's a good credit score?
If you’ve got one of these, lenders should see you as a lower risk. A higher credit score could increase your chances of getting the loan or credit card you want. You might get offered a card at a low interest rate or with higher credit limits. But, it’s worth nothing that every lender has different criteria.
What’s bad credit history?
This typically means a history of late payments, missed payments or exceeded credit limits - as well as a low (often known as ‘poor’) overall score.
What’s classed as a bad score depends on the banks and providers. Each one has different ways of judging a credit score.
For example, poor credit scores range from between 561 and 720 with Experian, whereas any credit rating between 0-560 is considered an extremely poor score.
What affects your credit score?
Your payment history: This can be an important factor when it comes to credit scores - even one missed payment can change your score. Before lenders accept you, they need to be confident you’ll repay your debt on time. If you have a history of late or missed payments, this can have a negative effect on your score.
Your available credit: Having several different types of credit can be a positive with lenders. But, it won’t go down too well if you’re close to the limit on all of them. This could suggest you’ve become reliant on borrowing. Paying your credit card balance in full by your statement due date will help you avoid interest charges.
Too many hard credit searches: Getting turned down for credit can be frustrating, but try not to apply to lots of different lenders. Multiple applications often lead to numerous hard searches on your credit file. And too many in a short space of time can have a negative impact on your credit score.
Negative credit info: Late or missed payments, county court judgments (CCJs), debt relief orders (DROs), individual voluntary arrangements (IVAs) and bankruptcy are all examples of negative history that can show in your credit file. While a missed payment will stay on your report for six months, things like CCJs and IVAs can remain for six years after they’ve been discharged. However, you could lessen the effect over time by managing your money responsibly.
How to check your credit score
Checking your own credit report using a ’soft’ eligibility checker won’t have any impact on your score or affect your chances of being accepted for credit. In fact, it could give you an idea of what affects your credit score.
While lenders aren’t likely to tell you what score they gave you, they must say which credit reference agency they used. You can then visit this agency's website and, for a small fee, get the same info lenders see when they check your credit reference file.
Check your score for free
If you don’t want to pay to see your score, you could sign up to a free credit checking service like ClearScore. It may also be a good idea to do an eligibility check with your lender before you apply.
How your credit score is calculated
The lender is likely to check your credit history with one of the three main credit reference agencies - Equifax, Experian, and TransUnion. These agencies share details with building societies, banks and retailers to build a picture of how likely you are to keep up with repayments.
Alongside their own system, lenders often use this info to calculate your credit score. This is usually based on your credit history, application and any other details the lender already holds. This info could include:
- Employment status
Some lenders may give you a lower score if you don't have a full-time job. Find out more about getting a credit card if you’re on a low income.
- The sort of credit you’re applying for
Applications for a credit card are often scored differently to loans. Your credit rating might serve you better if you’re applying for a secured loan. This is because your property (or other asset) is used as security if you can’t make repayments.
- The amount of credit you currently have
Already having several credit agreements - like overdrafts, loans and credit cards - can affect your score. If you’re close to your lending limit on these, your score may also be affected.
- The number of applications you’ve made
Every time you do an application, or someone checks your credit history with a ’hard’ search, it’s recorded on your credit file. Your credit score might be lower if lots of credit enquiries are made in a short period of time. This can make lenders think you’re desperate for credit or struggling with your bills.
There's no easy way to tell what credit score a lender sees - and they won’t usually say what it is, even if you ask. You can always check your credit history beforehand though and this may give you an idea if your application will be successful.
What's a Credit Check?
This is when a company or individual (a landlord/landlady, employer or financial service, for example) looks at your credit report to understand your financial habits. It’s also sometimes called a credit search and it shows how well you manage your money and whether you repay your credit on time. It can also see the credit history of anyone you’re linked to financially, like a partner you share a bank account with.
There are two types of credit check:
- Hard credit check: When you make a full application for lending, this is recorded on your credit report as a hard credit check, or hard credit search. This means any company searching your report can see you’ve recently applied for credit. Having too many hard checks in a short period of time can impact your credit score.
- Soft credit check: Also known as a soft credit search, these don’t have a negative impact on your credit report and aren’t seen by others. They are usually done by potential employers or lenders who offer an eligibility check for an instant initial decision. Just so you know, not every lender offers this option, so take care when you apply. For more info on soft searches, check out our soft credit check guide.
Why lenders check your credit history
A lender’s main aim is to work out how much of a risk it could be to lend to you. It can be helpful to check your own credit score to see if there’s anything you can do to improve it. But keep in mind it’s just one of many ways lenders assess your credit stability. It’s also worth remembering that soft eligibility checkers don’t hurt your credit history, unlike too many hard searches and rejected applications. If you've been turned down by a lender, you may want to consider checking your file and waiting a while before applying for credit again.
You can see an example of an Experian credit report here. You’ll notice that as well as your individual score itself, the agency will often give you the positives and negatives affecting your credit score. You might see things like missed payments on bills or credit cards, which may have damaged your score.
In general, you could use this as a guideline to understand how lenders will see you and, if your credit score is low, do something to improve it before you apply again.
Credit score range
All the credit reference agencies have an ideal number when it comes to your credit score. And each lender will look for different things in potential customers. While you might be a good candidate for one, you may be rejected by another.
The three main credit reference agencies use their own scoring system, so there’s no single figure that represents a good or bad credit score. But, you might want to aim for a ‘good’ or ‘excellent’ score, regardless of which agency or bank you use to check your credit.
A couple of useful nuggets
To help you learn more about your credit score or borrowing options, here’s some more handy info.
How to improve your credit rating
One of the more common credit score myths are that certain quick fixes can rapidly improve your score. Sadly, this isn’t the case. Building your credit score takes a combination of patience, good money management and using the right products to suit your situation. Head to our page on improving your credit score for more details.
Secured and unsecured cards
Most credit cards are unsecured. This means you can borrow on them without putting down a deposit or using your possessions as a guarantee. Although they are rare, secured credit cards have less strict lending requirements and may be easier get. You’ll usually be asked to put down a cash deposit as security against your borrowing though. If you miss payments, the lender will be able to take some (or all) of the deposit to repay what you owe them. For more info, check out our secured vs unsecured cards page.
FAQs
Does a low credit score stop me getting a credit card?
A low credit score doesn’t always mean you can’t get a credit card. Though you may find you’re only offered ones with a lower credit limit and higher interest rate.
If your application for a regular credit card is denied, you may be able to access a different card with more suitable interest rates and lower credit limits, like the Vanquis Credit Builder Credit Card.
Which personal details do credit referencing agencies hold?
Credit reference agencies typically have data that shows how well you’ve managed your credit, as well as info that can help confirm your identity.
This includes:
- CCJs (County Court Judgments)
- Electoral register details
- Bankruptcy info
- Insolvency data
What if my credit file’s incorrect?
If you think any details are wrong, you need to contact the credit reference agency that has the incorrect info and fill out an online form.
If this doesn’t work and it shows again, you can get help from the Financial Ombudsman.
How can I build a credit history?
Building a strong credit history can take time - it doesn’t just happen overnight.
Good financial practice like repaying loans, making at least your minimum repayment and staying within your credit limit can speed up the improvement. But you may need to be patient.
How can I check my credit history?
You can use any credible online credit checker - like Experian, TransUnion or ClearScore - and also most banks. Many of these providers use soft checks that won’t impact how lenders view your credit profile.
Please note, too many applications that involve a hard credit search can damage your credit score - especially if they happen a short space of time.
If you’re looking for an alternative that doesn’t hurt your score, the Vanquis Soft Eligibility Checker will let you know if you’re eligible for a credit building card. It’ll also say what credit limit and interest rate you may be able to get.
What’s a good credit history?
You might find it easier to achieve a good credit score if you’ve never missed a repayment or declared bankruptcy. Showing any current or potential lenders you’re good at managing your credit could help with this.
Although there isn’t a universal number for a good credit score, it’s anything over 700 for Experian and between 661 and 720 for TransUnion.
If you’re using Equifax, which has a credit rating range between 300 and 850, a good score is anywhere from 670 to 850.
What’s the average credit score?
According to Experian, it’s 797 out of 999 in the UK.
However, this doesn’t mean the average credit score is the same for all credit reference agencies and it can vary between providers. For example, the average credit score according to TransUnion is 573.
Is 700 a good credit score?
For reputable credit reference agencies, like TransUnion, Equifax or Experian, anything over 700 is considered good.
But it might be worth noting that agencies have different ways of measuring credit scores and put different values to their scores – they’re not the same across the board.
When it comes to TransUnion, whose highest credit score is 710, 700 is an almost perfect score. When compared with Experian or Equifax, whose highest scores are 999, 700 may be a more average rating.