How credit score works and how to improve it
If you live in the UK or plan to move there, understanding how the credit score system works is essential for getting a good credit card, financing, or even renting a property. Unlike other countries, the UK system has its own particularities and can be a bit confusing at first.
In this article, we’ll explain in detail how the credit score works in the UK, how it affects your ability to get a credit card, and strategies to improve your score and secure better financial conditions.
What is a credit score in the UK?
A credit score is a numerical representation of how reliable you are in paying your bills and debts. It is calculated based on your financial history and directly influences your ability to obtain loans, financing, and credit cards in the UK.
Banks and financial institutions use this score to decide whether to approve a credit application, as well as to determine interest rates and credit limits. The higher your credit score, the easier it is to get good financial offers.
How is the credit score calculated?
In the UK, your credit score is determined by three main credit reference agencies: Experian, Equifax, and TransUnion. Each agency uses its own scoring system and slightly different criteria, but all of them assess similar financial behaviors to determine how responsible you are with credit.
Payment history
This is the most important factor in your credit score. It tracks whether you pay your bills, loans, and credit card balances on time.
What helps your score:
- Paying all bills on time, including credit cards, loans, phone contracts, and utilities
- Setting up Direct Debit or reminders to avoid missing payments
What hurts your score:
- Late or missed payments
- Defaults, when a debt remains unpaid for a long time and the lender reports it as a failure to pay
- County Court Judgments (CCJs), Individual Voluntary Arrangements (IVAs), or bankruptcy
Tip: If you accidentally miss a payment, try to pay it as soon as possible and contact the lender to ask if they can avoid reporting it to credit agencies.
Credit utilization
Credit utilization refers to the percentage of your available credit that you are using. Lenders like to see that you can use credit responsibly without maxing out your cards.
What helps your score:
- Keeping your credit usage below 30 percent of your total credit limit
- Example: If you have a £2,000 limit, try to keep your balance below £600
What hurts your score:
- Using more than 50 percent of your credit limit regularly
- Maxing out your credit card every month
Tip: Even if you pay off your credit card in full every month, your score might drop if your utilization is high on the day the bank reports it to credit agencies. Consider making an early payment before your statement is generated.
Length of credit history
Your score improves the longer you have active credit accounts in good standing. Lenders prefer to see a long history of responsible credit use.
What helps your score:
- Keeping old credit accounts open
- Having a long positive history with a credit card, mortgage, or loan
What hurts your score:
- Closing your oldest credit card, which reduces your average account age
- Having no credit history, which is common if you’re new to the UK or have never used credit
Tip: If you have an old credit card with no fees, keep it open and use it occasionally to maintain your credit history.
Number of credit inquiries
Every time you apply for a credit card, loan, or financing, the lender performs a hard inquiry on your credit report. Too many hard inquiries in a short period can signal financial distress.
What helps your score:
- Applying for credit only when necessary
- Using eligibility checkers before applying (these perform a soft search that does not affect your score)
What hurts your score:
- Making multiple credit applications in a short period, especially if rejected
- Applying for many different types of credit at once, such as loans, credit cards, and overdrafts
Tip: If you’re looking for a loan, try to compare options within a short timeframe (usually 14-30 days), as some agencies will treat multiple inquiries for the same type of loan as a single inquiry.
Types of credit used
Having different types of credit accounts can show lenders that you can handle multiple forms of credit responsibly.
What helps your score:
- Having a mix of credit cards, loans, and utility bills in your name
- Successfully managing both revolving credit (credit cards) and installment loans (personal loans, car finance, mortgages)
What hurts your score:
- Having only one type of credit, such as only credit cards
- Relying too much on short-term high-interest loans, such as payday loans
Tip: You do not need to take out unnecessary loans, but having a mix of well-managed accounts can boost your score.
Public records
Certain negative financial events stay on your credit report for up to six years, making it harder to get credit.
What hurts your score:
- Defaults, missed payments that lead to account closure
- CCJs (County Court Judgments), if a lender takes you to court for unpaid debts
- Bankruptcy or Individual Voluntary Arrangements (IVAs)
Tip: If you’re struggling with debt, seek advice from StepChange, Citizens Advice, or National Debtline before your situation worsens.
How does credit score affect credit cards?
Your credit score directly influences which credit cards you can get and the conditions offered by banks. Here’s how:
Card approval
A high score increases your chances of approval for credit cards with better benefits like cashback, rewards, or travel miles. A low score may lead to rejection of premium cards.
Credit limit
People with high credit scores generally receive higher credit limits, while those with lower scores are given smaller limits.
Interest rates
If your score is low, banks may offer higher interest rates due to the higher risk of default. Those with high scores may qualify for low-interest rates or even 0% APR promotional cards.
Credit-building cards
If your score is low, you can still get a beginner credit card. These cards have lower limits and higher interest rates but help build a strong credit history over time.
How to check your credit score in the UK?
If you want to check your score before applying for a credit card, you can do so for free through the following services:
- Experian – One of the most widely used in the UK.
- Credit Karma – Uses TransUnion’s scoring system.
How to improve your credit score in the UK?
If your score isn’t as high as you’d like, here are some strategies to improve it:
Register on the electoral roll
Being registered on the Electoral Roll (UK voter registration) helps banks confirm your identity and can boost your credit score.
Pay your bills on time
This is one of the most important factors. Set up direct debits to ensure no missed payments on bills and credit card statements.
Reduce your credit utilization
If you have a credit card with a £2,000 limit, try to keep the balance below £600 (30% of the limit). This shows responsible credit management.
Avoid applying for too much credit at once
Each credit application generates a hard inquiry, which can temporarily lower your score. Avoid multiple applications in a short period.
Keep old accounts open
If you have an old credit card or bank account, keeping it open improves your score, as it shows a long and stable credit history.
Use credit-builder cards
If you have little or no credit history, consider applying for a credit-builder card. Some popular options in the UK include:
- Aqua Classic
- Capital One Classic
- Barclaycard Forward
These cards have lower limits and higher interest rates but help improve your credit history.
Conclusion
Having a good credit score in the UK is essential for obtaining credit cards with better conditions, higher limits, and lower interest rates.
If your score isn’t ideal, don’t worry! By paying bills on time, keeping low credit utilization, and avoiding excessive credit applications, you can improve your score over time.
Before applying for a credit card, check your score for free and choose an option that matches your profile. This way, you avoid unnecessary rejections and build a solid financial history in the UK.
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