A credit score is what lenders use to gauge an individual when applying for credit. If you have a higher credit score, lenders will perceive you to be a lower risk. When you apply for a loan, credit card or a mortgage with a good credit score in the UK, you are more likely to get approved and get better interest rates.
There is no ‘magic number’ for a credit score. Different lending organizations judge potential customers on a number of different factors. The 3 big Credit Rating Agencies (CRA) in the UK are Experian, Equifax and TransUnion. These agencies gather your credit history and calculate a credit score based on the information in your credit report. Before you apply for credit, check your credit score so that you can make a better informed choice.
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How is a Credit Score Calculated in the UK?
When you apply for credit, each lender will check your credit score from Credit Rating Agencies (CRA) and then decide to avail you credit or not. The thing is, there is no standardized way of calculating your credit score as each of them uses a different approach.
The table below is a breakdown of what Experian considers to be a good credit score in the UK and what you can avail depending on where your credit score lies.
| Excellent
(961 – 999) |
You should get the best credit cards, loans and mortgages but there are no guarantees. |
| Good
(881 – 960) |
You should get most credit cards, loans and mortgages but the very best deals may not be available to you. |
| Fair
(721 – 880) |
You might get average interest rates but your credit limits may not be very high. |
| Poor
(561 – 720) |
You might be accepted for credit cards, loans and mortgages but they may have higher interest rates. |
| Very Poor
(1 – 560) |
You are more likely to be rejected for most credit cards, loans and mortgages that are available. |
How to Improve Your Credit Score in the UK?
There are certain ways to improve your credit score. However, it will take time to reflect on your credit report, some of the ways are listed below.
- Register on the electoral roll at your current address
By registering on the electoral roll, lending organizations can easily confirm your identity and your permanent address.
- Pay your accounts on time and in full each month
For a good credit score in the UK, make sure to pay your bills on time without defaulting on amounts, lenders will perceive you as a responsible individual and of low risk.
- Keep your credit utilisation low
The credit utilization is the percentage of your credit limit you use. A lower percentage can see an increase in your credit score. CRAs such as Experian recommend that you keep your credit utilization at 25%.
How to Maintain a Good Credit Score in the UK?
If you have a decent credit score, it is much easier to improve and maintain it. Some of the ways are listed below.
Limit the number of credit applications you make
Do not apply for credit frequently over a short duration as lenders may perceive you to be extremely reliant on credit and will deem you as a higher risk. Each application you submit will be reflected on your credit report.
Close unused accounts
For a good credit score in the UK, it is advisable to close your unused bank accounts because if the credit amount available for you is too high, lenders will perceive you as a high risk and think that you are unable to handle more credit.
Make sure your payments are up to date
If you default on making payments, your credit score will be negatively impacted. Lending organizations will label your account as below.
- Delinquent Account
Accounts will be labelled as delinquent when you have made payments past the deadline.
- Defaulted Account
Accounts will be labelled as defaulted when you have missed several payments and will affect your relationship with the lender, making it harder to prove that you are trustworthy.
Always borrow within your means
Remember, to maintain a good credit score in the UK, borrow credit that you know you can payback on time. If you avail an amount that is well beyond your means, the chance of you getting into debt is much higher.
This will be displayed on your County Court Judgment (CCJ) report which is added to a public database. The public database is what lenders check before availing credit to the applicant. This information is reflected on the CCJ report for up to 6 years.
Keep an eye out for fraudulent activity
In case you notice any information on your credit report which is inaccurate, you must immediately report it to the authorities as engaging in fraudulent activities is against the law and can result in a hefty fine, jail term or both.
To know more about UK credit reviews, read this article.
Benefits of Having a Good Credit Score in the UK
A good or above average credit score will signify you as a low risk which will increase your chances of approval. Some of the benefits of having a good credit score are listed below.
- Lower interest rates
If you are perceived as a low risk, lenders will offer you better interest rates on which can make the process of paying back the loan much cheaper.
- Higher credit limit
If you have a good credit score in the UK, your chances of availing larger loan amounts are much higher which can help you in achieving your financial goals at a faster pace.