What is my credit score and why is it important?

When you borrow and repay money, your credit score builds up in the background based upon your credit history and habits. Here’s what could affect your score and things you can do to improve it.

Credit reports look at your borrowing history and how you’ve managed paying back money you’ve borrowed in the past. They’re put together by the three main credit reference agencies in the UK: Experian (Opens in new window),Equifax (Opens in new window) and TransUnion (Opens in new window)

A credit score can range from 0 to 1,000, depending on the agency, and is worked out using the information in your report.

Each agency might have slightly different credit scores for you and their own levels of what they rate as a 'poor', 'fair', 'good' or 'excellent' credit score. For example, Experian’s ‘good’ credit score starts at 881, while TransUnion’s starts at 604.

What they all have in common though is that they offer similar perspectives over how lenders may view you when you're looking to do something that involves credit – applying for a loan, credit card, mobile phone contract or securing a mortgage deal.

Where can I find my credit report?

Although some providers may charge a monthly fee, there are ways to obtain your credit report for free:

• View your Equifax (Opens in new window) report and score
• Access your credit score through a free Experian account (Opens in new window)
• Get your TransUnion report and score through Credit Karma (Opens in new window) or TotallyMoney (Opens in new window)

Signing up for a free trial with checkmyfile (Opens in new window) gives you access to the information held by all three agencies for 30 days (after which a fee will apply).

Good to know

You're also legally entitled to access your statutory credit report for free online or by post, or you can request them directly from Equifax (Opens in new window),Experian (Opens in new window) and TransUnion (Opens in new window) This contains your detailed credit account information and history, albeit sometimes without the simplicity of also getting your associated three-digit score.

Why is a credit score important?

A credit score is a snapshot of your relationship with money. Simply put, the higher your score, the better you may look to a bank, building society, credit card company or other lenders.

Your credit score can help you understand how lenders might assess how risky it would be to lend you money and whether you’re reliable when it comes to paying it back, as well as deciding how much interest you’ll pay and what your credit limit could be. Lenders also have their own processes and consider factors besides scores to help make their decisions about you – so just because you're turned down from one doesn't mean another won't take you on.

What’s affecting my credit score?

Your credit score isn’t set in stone and some movement up or down is quite normal. But it’s a good idea to check it regularly to make sure it isn’t changing too much, as this could be due to inaccurate information in your credit report. Also, it could be due to someone fraudulently using your details.

Things that can affect your score include:

1. Your payment history
2. Presence of any public records, such as bankruptcies
3. Your credit usage, including if you're keeping your debt to manageable levels
4. The age of your credit accounts, which demonstrates your experience in managing credit
5. Your credit limits and how much available credit you have access to
6. Whether you're registered on the electoral roll
7. New account openings, as making too many credit applications at once may signal to lenders you need more money

The way you work with and use your credit can affect your score – even the day-to-day stuff. It could be a change to your credit card balance, opening a new account somewhere, closing an account or simply making (or missing) a payment on a credit card.

What can I do to improve my credit score?

There are a number of ways you could take to improve your credit score:

1. Pay your bills on time. It's a good idea to get into this habit, to show lenders you're reliable at paying things like your rent or mortgage, and credit card bills. Set up Direct Debits for an easy way to make sure you're always paying on time.
2. Look to only use your credit card for purchases you can afford. That way, you're in a stronger position to make your required payments every month. Avoid maxing out your credit card – aim to use only a portion of your total credit limit.
3. Continue to build your credit history by using credit responsibly. Keep your oldest credit accounts open, if it makes sense for your financial situation and you can keep them current. Having established accounts in good order shows lenders you're experienced and reliable when it comes to managing credit.
4. Avoid withdrawing cash using your credit card. Lenders could see this as a red flag and it can also be expensive.
5. Correct any errors on your credit report. Get a copy from the three agencies and highlight any errors or clarify information with them directly. This could be anything from an incorrect address to letting them know you’re no longer linked to a joint bank account with someone, or flagging anything that you haven't done, as this could be fraudulent activity
6. Put yourself on the electoral register. Registering your details on the electoral roll helps lenders quickly verify your identity if you want to take out a loan.

Although a high credit score isn’t a magic wand for all your money worries, it can make things easier during the times when you need the benefits that come from having a good score. And if you can make some changes to your spending habits and how you handle and pay off debt, you could improve your score at the same time.

Recommended reading

• What to do if your credit score if affected by fraud
• How does bad credit affect your mortgage chances?
• How to separate joint debt after a divorce

Disclaimer: The Hub is intended as a knowledge portal to provide information on a range of topics, including financial products. Articles may reference products and services that Chase UK does not currently offer. This article is for information only and does not constitute financial advice.