In very basic terms, your credit score is a number, ranging between 0 and 999. It is an indication of how reliable you have been in the past when paying back money you have borrowed from a bank or on something like a credit card. If your credit score is high, then you stand a good chance of being approved if you are thinking of moving house and taking out a new mortgage or applying for finance for a new kitchen or large item of furniture. On the other hand, a low credit score can mean your options are limited.

Credit scores are generated by the major credit reference agencies, using what they already know about your financial history. You can get access to this information too. When you fill in an application to borrow money, the bank will look at your credit score when deciding if you’re likely to pay it back or not. Your credit score may also affect how much money the bank or other financial institution will be prepared to lend you.

Factors Impacting Your Credit Score

Your credit score is like your financial CV. If you’ve never missed a payment on a credit card and never defaulted on a loan, then this will affect your credit score in a positive way. If you have a chequered financial past, with defaults or County Court Judgements (CCJs), then this will make your credit score lower.

People who have never borrowed money and never had a credit card might find that their score is low, purely because there is no track record of them being able to borrow money and pay it back regularly.

Credit scores are calculated by looking at the different factors on your credit file. This is information recorded in a digital database, which will show all of your credit agreements such as mortgage, personal loan or credit cards. This includes finance you have taken out with someone else. The database will also show payments and will highlight any missed payments over the last six years. The score also looks at public records, mainly the electoral roll and the list of CCJs. Your credit file contains purely borrowing information, and nothing about your job, salary, spending habits or medical information.

Who Holds This Information About Me?

Banks and other lenders don’t have their own information about you, apart from any accounts you have with them. All lenders use one of the main UK credit reference agencies to help them make a decision. The three main agencies in the UK are Equifax, Experian, and TransUnion. They provide the information about you but don’t make decisions or provide recommendations to the lender. Individuals have the right to request to see the information which any of the credit referencing agencies have about them. If you come across a mistake on your record, then you have the right to ask the credit referencing agency to correct it.

What Can I Do to Influence My Score?

If you have found that you are struggling to get finance and think your credit record might be to blame, then there is lots you can do to get the numbers upwards. Firstly, get your finances in order and pay off any outstanding sums, making a plan not to get behind on payments again. Check you are listed on the electoral roll and request your credit file to make sure there are no obvious mistakes listed. If lack of a track record is the problem, think about taking out a credit card with a small limit, and paying it off in full every month.