Your credit score plays a key role in many financial decisions, from applying for a loan or mortgage to renting a property or even setting up a mobile phone contract. Yet for many people, how a credit score is actually calculated can feel confusing or unclear.
Understanding what affects your credit score can help you take control of your finances, avoid common pitfalls, and make informed decisions about borrowing. This guide explains how credit scores work in the UK, what factors influence them, and what you can do to improve yours.
What Is a Credit Score?
A credit score is a numerical representation of how reliable you appear as a borrower. It’s based on information held about you by credit reference agencies, including your borrowing history, payment behaviour, and overall financial conduct.
In the UK, credit scores are calculated by three main credit reference agencies:
- Experian
- Equifax
- TransUnion
Each agency uses its own scoring system, which means your score can differ slightly between them. Lenders don’t see a universal “credit score” , instead, they review the information on your credit report and use their own criteria to assess risk.
What Information Is Used to Calculate Your Credit Score?
Your credit score is influenced by several key factors. These work together to give lenders an overall picture of how you manage money and whether you’re likely to repay credit on time.
1. Payment History
Your payment history is one of the most important factors in your credit score. It shows whether you’ve paid bills and credit commitments on time.
Late payments, missed payments, defaults, or arrears can all have a negative impact. On the other hand, consistently paying your bills on time helps build a positive credit profile.
This includes:
- Credit cards
- Loans and overdrafts
- Utility bills and mobile phone contracts
2. Credit Usage (Credit Utilisation)
Credit utilisation refers to how much of your available credit you’re using. For example, if you have a credit limit of £1,000 and regularly use £900 of it, this can signal financial pressure.
Using a smaller percentage of your available credit generally looks more responsible to lenders and can help improve your score over time.
3. Length of Credit History
How long you’ve had credit also matters. Lenders like to see a track record of managing credit responsibly over time.
If you’re new to credit or have only recently started using financial products, your score may be lower simply because there’s less information available. Keeping long-standing accounts open and well managed can help demonstrate stability.
4. Types of Credit You Use
Having a mix of credit types, such as a credit card, a loan, or a mobile phone contract , can have a positive effect, as long as everything is managed well.
That said, you should never take on credit just to improve your score. Only borrow what you need and can comfortably afford to repay.
5. Credit Applications and Searches
Every time you apply for credit, a hard search may be recorded on your credit file. Too many applications in a short space of time can suggest financial difficulty and may lower your score.
Checking your own credit file or using eligibility checkers does not affect your score. These are known as soft searches.
6. Public Records and Financial History
Certain financial events have a significant impact on your credit score, including:
- County Court Judgments (CCJs)
- Individual Voluntary Arrangements (IVAs)
- Debt Relief Orders (DROs)
- Bankruptcy
These records usually stay on your credit file for six years and can make accessing credit more difficult during that time. However, their impact lessens over time, especially if you demonstrate responsible financial behaviour afterward.
How Lenders Use Your Credit Information
When you apply for credit, lenders don’t just look at a number. They review your credit report as a whole, considering:
- Your income and affordability
- Your existing debts
- Your recent credit activity
- Your overall financial stability
Different lenders have different criteria, which means one lender may approve you while another may not.
How to Improve Your Credit Score
Improving your credit score takes time, but there are practical steps you can take:
- Pay all bills on time, including utilities and mobile contracts
- Keep credit balances low and avoid maxing out cards
- Avoid making multiple credit applications in a short period
- Check your credit report regularly and correct any errors
- Register on the electoral roll, as this helps verify your identity
Consistency is key, small positive habits over time can make a big difference.
How Long Does It Take to Improve a Credit Score?
There’s no instant fix, but many people start to see improvements within a few months of making positive changes. More serious issues, such as defaults or IVAs, will take longer to recover from but will have less impact as time goes on.
Once negative information drops off your credit file, usually after six years , your score may improve significantly, provided you’ve managed your finances well in the meantime.
Your credit score is a snapshot of your financial behaviour over time, not a judgement on you as a person. While past difficulties can affect your score, they don’t define your future.
By understanding how credit scores work and taking consistent steps to manage your finances responsibly, you can improve your financial health and open more opportunities over time.
If you’re unsure where to start or want support understanding your credit situation, My Debt Plan can help guide you through your options and help you move forward with confidence.
