What is a credit score?

Checking your credit score gives you knowledge. Once you’re armed with information about your credit score, you can understand what lenders see when they check your credit report, and why they make certain decisions about credit applications.

Checking your credit score can also help you identify any incorrect information that might be holding you back.

A better credit score will unlock access to more credit and better offers at more competitive rates.

payment behaviour explains 48% of your credit score – it’s the largest contributing factor.

Your payment behaviour includes:

This is checked across all your credit accounts. Missing payments will damage your credit score, so never miss a payment and always pay on time.

Credit usage accounts for 21% of your credit score.

Your credit usage looks at all your credit accounts — including credit cards, overdrafts, mortgages, and loans – and considers:

You should always try and use less than 25% of your total credit limit across each of your credit accounts.

Carrying a balance of more than a quarter of your total available credit could cause your credit score to drop.

Once you reach 50% of your total credit limit, your credit score can fall a lot. It suggests you’re struggling to manage the credit you have, and makes lenders cautious about letting you borrow more.

Never use close to 100% of your available credit. If you’re getting close to your credit limit, consider asking for your credit limit to be increased.

Credit experience accounts for a further 21% of your credit score.

Your credit experience includes:

Your credit experience refers to the amount of credit history you have.

For example, if you’re new to credit, there won’t be much evidence of your experience using it. This could explain why your credit score is on the low side.

You should show you have experience of using a variety of credit products responsibly over a longer time — this suggests you know how to manage credit, which can increase your score.

Your desire for credit makes up 5% of your credit score. Your desire for credit includes:

If you’ve recently opened a few new credit accounts, it could make credit reference agencies think you’re eager for credit. This may cause your credit score to drop.

The more applications you make, the more hard searches will appear on your credit file, which will be visible to lenders and will have an effect on the way they view you.

You should always check your eligibility for credit products before applying. This will show you how likely you are to be accepted. This will use a soft search which, while visible to you, won’t be visible to lenders, so it won't affect your credit worthiness.

On the other hand, if you’ve closed old credit accounts, your credit score may improve.

The types of credit you use makes up 5% of your credit score.

Your types of credit can include:

If you have a good reputation for managing different types of credit, it can help to improve your credit score.

For example, if you’ve taken out a loan, you’ll often pay this back in fixed, monthly instalments.

Using a credit card, on the other hand, will have different monthly repayments, depending on how much you spend.

It shows lenders you’re able to handle different credit products and can be trusted to handle more, which can improve your credit score.

A credit score is a number given to you by a credit reference agency.

This number indicates your creditworthiness – that is, how willing banks and other lenders are to lend you money.

In the UK, there’s no such thing as a universal credit score. The three credit reference agencies all calculate your credit score slightly differently.

Lenders will use different criteria to decide whether to give you credit, but they can use your credit score as a basis for this assessment.

But, as a rule, the higher your credit score, the more likely you are to be accepted for credit and the more competitive interest rates you’ll be offered.