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What is a credit score?

Your credit score is a three-digit number that indicates how reliable you are at borrowing and repaying money.

A good score can help you get approved for credit cards, loans and mortgages, while a bad score can stop you getting approved. 

Credit reference agencies compile information about your financial history – known as a credit report – and use it to generate a credit score.

If you apply to borrow money, banks will look at your credit score before deciding whether to accept your application. It may also help them decide how much to offer you.

What impacts your credit score?

Your credit score reflects the way you’ve managed your debts and bills in the past. So if you’ve borrowed money in the past and always kept up with repayments, this will have had a positive impact on your score. But a history of missing or making late payments would have had a negative impact. 

If you’ve never borrowed money before, it's difficult for lenders to assess the risk of lending to you and your credit score will reflect that. 

Your credit score is based on your credit report, also known as a credit file.

What’s included in your credit report:

  • all your credit agreements such as loans and credit cards, including any held jointly with other people

  • your history of credit repayment, including payments you've missed over the last six years

  • public records, including County Court Judgments and the electoral roll

Your credit report doesn’t include things such as your medical history or salary.

Credit scores vs credit ratings

Credit scores and credit ratings are both tools used by lenders to decide how creditworthy you are. Scores are numerical, while ratings show where you are on a scale or in a banding. 

There's no universal credit score or credit rating system. Different lenders and credit reference agencies create scores using their own methods and tools.

Who are the credit reference agencies?

The major UK agencies are TransUnion, Equifax and Experian. They don't make lending decisions and lenders don't tell them how the information they provided has affected a decision. 

A credit report won't tell you for certain whether you'll succeed in a credit application, but it’s worth checking yours doesn’t include any incorrect information.

Why do credit scores matter?

Your credit score can determine whether you get accepted for a loan or credit card and impacts the type of deal you might be offered. 

If you have a poor credit score, you may find you're offered a higher interest rate. It can also affect other types of credit agreements, such as mobile phone plans.

Building a good credit score

If you want to improve your credit score the best thing you can do is make all your repayments on time and clear any existing debts as soon as possible.