When applying for credit, a ‘good’ credit score is an important factor in being accepted. A good credit score should help you to access better borrowing options in future.
Credit reference agencies collect information from public records, lenders and other service providers. Each agency has their own rating system. A higher credit score could mean you’re more likely to be accepted when you apply for credit, although it’s not a guarantee.
When you apply for credit, lenders and service providers may check your credit record as part of their decision-making process. The information held by each agency may vary, so it could be worth reviewing your credit scores and reports with TransUnion, Experian and Equifax.
You may be able to build your score, for example, by making payments on time, managing accounts well, limiting new credit applications and registering to vote.

How is a credit score calculated?

Each credit reference agency collects information about you from public records, and from lenders or other service providers. A number of factors can influence the credit scores they generate, including the amount of existing borrowing, and how well accounts are managed. They could hold different information about you, and have their own way of scoring, but the credit reference agencies do share similar views on what constitutes a ‘good’ credit score. Just bear in mind, lenders and service providers might do their own scoring when you apply for credit, looking at information from your credit record. They also consider other factors like affordability and any past account history.

Checking your credit score and report

When you apply, lenders and service providers contact their preferred credit reference agencies to check your credit record, which will highlight any potential risks associated with offering you credit.
It’s a good idea, especially if you’re planning an application, to check the details held by each credit reference agency. If any of their information is incorrect, you could submit a data dispute to the relevant agency, so they can investigate and update their records accordingly.

What is considered a ‘good’ credit score?

The measurement scale used by each credit reference agency varies but, as a general rule, the higher the number, the stronger your chances are of being accepted when you make a credit application.
Maintaining a good credit score isn’t a guarantee you’ll be accepted – lenders and service providers look at other factors including affordability and any past account history – but it still gives you a useful impression of your financial position at any moment in time.

How to improve your credit score

Anything you do will take time, but you could improve your credit score by:
• Paying all bills on time – including credit repayments, utility and other household bills.
• Managing accounts well – stay below your credit limits and try to reduce debit balances whenever possible.
• Limiting applications – whether or not you’re accepted, ‘hard’ credit searches could impact your credit score, especially if you make a number of full applications in a short period of time.
• Registering to vote – it may improve your credit
What damages your credit score?
Below are just a few of the things which may impact your credit score:
• Missed or late payments – it could help to set up automatic Direct Debit payments. If you ever find yourself experiencing financial difficulties and can’t manage your payments, lenders and service providers may be able to help.
• How accounts are managed – lenders and service providers will report arrears, missed, late or defaulted payments, and if you go over any agreed credit limits.
• Making lots of applications – whether or not you’re accepted, ‘hard’ credit searches could impact your credit score.
• Not being on the electoral register – being on the electoral roll is one way your identity and home address can be confirmed.

What are the benefits of a good credit score?

• The higher your credit score is, the more likely it could be that a mortgage, credit card, personal loan, overdraft or car finance application will be accepted.
• Depending on the type of borrowing, the lowest and longest lasting interest rates might be offered to low risk applicants, who’ve shown they can manage credit responsibly over time.
• Your credit score can also affect the amount of credit you are offered.
• Bad credit might affect your ability to get some jobs, e.g. in legal or financial services.