What is a credit score?

What is a credit score?

Your credit score is a three-digit number that reflects how credit-worthy you are perceived to be. The number is based on a variety of different factors – such as:

  • Income
  • Current and past financial behaviour
  • Length of time at an address
  • Whether or not a person is on the electoral roll

Why is a credit score important?

Before entering a credit agreement, a lender will want to find out what kind of borrower you are so they can decide whether or not they should lend to you. They will base their decision on your credit score, as past financial behaviour is often an indicator of how someone will manage their debts in the future.

Credit scores are used for a number of different reasons, such as:

  • When borrowing money: credit cards, overdrafts, mortgages and loans.
  • When applying for finance on a product, like a car or phone contract.

Offering credit to people with a low credit score is considered risky so, generally speaking, the higher the credit score assigned to an individual, the more likely that person will be to not only obtain credit, but to gain this on more favourable terms.

Having a low credit score doesn’t automatically sentence someone to not being able to obtain credit, but it will certainly make the process more difficult and significantly more expensive.

How to check your credit score?

There are three main credit reference agencies that organisations use to check your credit score: Equifax, Experian and Callcredit. You can request a statutory credit report, which will also include your credit score, from these agencies for £2; or you can gain regular access to your report for a monthly fee.

It’s important to remember that, in the UK, there is no such thing as a single, universal credit score; meaning this may change across the three agencies. It could be beneficial then, to apply for a credit report from all three on a yearly basis to gain a more comprehensive view of your credit score, and to ensure that any mistakes on your file are rectified to as soon as possible.

How to improve your credit score?

Ensuring your financial health is tip-top will benefit you later in life, particularly when making big financial decisions. If your credit score isn’t currently gleaming, fear not, as there are a number of ways in which you can improve it:

  • Check your report regularly: checking your report on a regular basis will help ensure all the information held about you is correct. This is extremely important, as even a small error can have a detrimental effect on your score. If you spot any mistakes, ask the relevant agency to correct these as soon as possible.
  • Register on the electoral roll: being on the electoral roll can significantly improve your credit score, as it makes it easier for lenders to confirm your address and identity.
  • Manage your debts responsibly: this includes not missing any payments, staying within your credit limit and, where possible, clearing your debt altogether.
  • Close down your old (credit) accounts: lenders will often look at your available credit when assessing your application for credit; if you have a fair amount of available credit across a number of cards, this may cause problems. On the other hand, it’s important to note that old bank accounts with positive past credit can be beneficial to your credit score, so it’s worth keeping these open.

What is marriage allowance?

Are you married and not using all your annual tax-free allowance? Read on to find out how your partner could save on their tax bill with marriage allowance

Find out more

What is Capital Gains Tax?

Confused about Capital Gains Tax? Our helpful articles explains what it is, when you need to pay it, and highlights the circumstances in which you are exempt

Find out more

Contact us

Get in contact with the right person to answer your queries, or just talk to us about how we can help you and your family.

Preparing your home before a storm

With a little preparation you could help to reduce the potential for damage - and save yourself some money and stress in the process.

Aviva Drive

Safer drivers scoring 7.1 or more save an average of £170, a saving that can be achieved by 52% of them.

Back to top