Credit scores

Top tips to boost your creditworthiness

Everyone should take time to manage their credit report and score. Your credit report is vital – it's not just about whether you can get a mortgage, credit card or a loan, it can also affect mobile phone contracts, monthly car insurance, bank accounts and more. And now the cost of living crisis is pushing the importance of a good credit report even further. Here's all you need to know about credit checks.

Important. This guide was originally written by founder Martin Lewis, but it is now regularly updated by the editorial team.

Watch Martin's five-minute credit scoring tips video

For a quick overview of the top credit scoring tips, first watch founder Martin Lewis's five-minute introductory video.

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This clip has been taken from The Martin Lewis Money Show Live on Tuesday 30 January 2024. With the kind permission of ITV Studios. All rights reserved.

What is a credit rating and credit score?

A credit rating shows how likely a typical lender would be to offer you credit.

When you apply for credit – such as a loan, credit card or mortgage – the lender tries to predict your future behaviour based on the way you've acted in the past. Credit scoring is fairly intuitive – just think whether you'd lend to someone with a history of not repaying?

To work it all out, lenders look at lots of different data. This may include how many applications you've made recently, how much you owe, what credit products you've had and whether you paid them all off on time. Some of this comes from their own information, but often they'll also consult credit reference agencies Experian, Equifax or TransUnion, which hold much of this data on you.

But the world of credit ratings is rife with misinformation and misunderstanding. Much of it is because lenders don't want it understood, and credit reference agencies want you to think it works a certain way so they can sell you extra products based on fear.

This jargon buster should help you navigate the world of credit ratings and scores:

  • Credit reference agencies: Three credit reference agencies – Experian, Equifax and TransUnion – hold tons of info about your past behaviour, such as your payment history to credit card, loan and mortgage firms, your past applications for credit, and whether you're on the electoral roll. Lenders use this data to help them decide whether to grant you credit.

  • Credit history: This is your past behaviour with credit, such as whether you've paid lenders back on time. It is not a numerical verdict, instead it's the term for a more general look back.

  • Credit report or credit file: This is the compendium of your data as held by each of the three credit reference agencies.

  • Credit score (specifically from a credit reference agency): As mentioned above, this is simply a view from one agency, which remember is not the decision maker on whether you'll get credit or not. Lenders use their own scoring systems.

  • Credit score or credit rating (where we're not talking about a score from a credit agency): In this context it can also be used interchangeably in casual speak with credit history. But technically speaking, it is how each lender sums up your credit history with its own score or rating. As it's so secretive we don't know if lenders use numbers, rankings or other means to judge customers. Whatever they use, it applies just to that lender and is not used market-wide by others.

IMPORTANT: Your credit history impacts your creditworthiness but you DON'T have a uniform credit score or credit rating

Don't fall for the misconceptions – in the UK, there's no one credit rating or score that is a market-wide judge of your creditworthiness, and there's no blacklist of banned people.

While individual credit reference agencies may give you a score, that is simply their view of your history, sometimes as a means to sell you that verdict as part of a subscription service.

Yet the agencies just collect data that they share with lenders. It's lenders that make decisions whether to give you credit and each lender scores you differently and secretly, and their scores are far more important. 

Here are our ten other credit rating need-to-knows:

  1. Credit scoring is about predicting future behaviour

    This isn't easy if you have little or no credit history. When you apply for a product, a 'credit check' is done. In practice, this means lenders put all the data they have on you into a complicated algorithm. It's an attempt to predict your future behaviour based on what you've done in the past.

    While a poor history counts against you, so does having little credit history as it makes predictions less certain.

    Imagine you are lending someone money. On the surface, they may appear trustworthy. But if you don't have much info about them, you'd want to know more, just to be sure.

    That's why one of the key challenges for some is to build a credit history – though it's not easy if no one will give you credit. 

    If you're one of the UK's five million credit 'invisibles' in that situation, you can find help on how to build your credit history. It's aimed at students and the young, but the theory applies to everyone. If you're currently a student and want to understand more about student loans and your credit file, see Student credit scoring

    • I've recently moved to the UK – does my history from abroad count?

      Unfortunately, if you're new to the UK – even if you built up a really good credit history in the country you lived in before – you'll essentially be starting your credit history again, as credit scores can't cross borders. This'll also be the case if you're emigrating from the UK to another country.

      In the UK, the credit reference agencies Experian, Equifax and TransUnion build credit reports using information from UK accounts only, so if you've just moved here, you'll probably find that your report looks quite bare, which'll impact your ability to get credit.

      For this reason, it's important to start building your UK credit history soon after arriving in the country. Do keep copies of your credit history from abroad though, as with some lenders it could help with your application (and vice versa if emigrating from the UK).

      If you're in this situation, see our Build your credit history guide.

  2. It's as much about 'will you make the lender money' as it is about risk

    Many people write to us incensed after rejection – "I've a perfect credit score, I've never missed a payment, why on earth did they reject me?". This is based on a misunderstanding – lenders are credit scoring to see if you match up to their wish list of what makes a profitable customer.

    Of course, someone who is a bad risk is likely to be scored out as unprofitable by most companies. But the risk of not repaying isn't the be-all and end-all.

    Imagine a bank wants new mortgage customers. That's a costly sell. Instead, it offers a current account paying a high rate of interest on a small amount kept in it. Yet when you apply, rather than scoring you as a bank account customer, it could actually be scoring to see if you're likely to be a profitable mortgage borrower in future – you might face rejection if you aren't.

    The secretive nature of credit scoring makes this difficult to ever truly know. You may also face a decline if you're unlikely to make the credit card much money...

    Pay off in full every month, don't use your cards enough, or always shift debt to 0% cards? You might feel like a dream punter, but for credit card companies you're a nightmare. If they spot this trend, you could be rejected. The most profitable customers are those perpetually in debt, never defaulting, but always meeting the minimum repayment.

    DON'T use this as an excuse not to pay off your credit card in full, especially if you don't have a 0% card (though you really should). For more info, see our Best balance transfer credit cards guide.

  3. What lenders really know about you

    It's important to be aware of exactly what lenders know when you apply, so you can present yourself in the best light. Importantly, it's more than just what's on your credit file.

    The application form. In many ways this is the most important part. Here, lenders obtain the key details: your postcode, salary, family size, reason for the loan and whether you're a home owner.

    Make sure you fill in the forms carefully. One slight slip, such as a "£2,000" salary rather than a "£20,000" one, can kibosh any application.

    Be consistent too. Fraud-scoring firms filter applications and if there are many inconsistencies – such as changing your job title or different phone numbers, it can cause a problem that you may not be told about.

    Past dealings you've had with the lender. Companies use any data on previous dealings they've had with you to feed into the credit score. This means those with limited credit history may find their own bank more likely to lend to them than others.

    Of course, those who've had problems with a lender in the past may find it more difficult to get accepted there too.

    Equifax, Experian and TransUnion credit files. The three UK credit reference agencies compile information, allowing them to send data on any UK individual to prospective lenders. All lenders use at least one agency. This data comes from four main sources:

    - Electoral roll information. This is publicly available and contains details of addresses and who lives at them.

    - Court records. County court judgments, decrees, individual voluntary arrangements, bankruptcies and other court debt orders indicate if you have a history of debt problems.

    - Search, address and linked data. This includes records of other lenders that have searched your file when you've applied for credit, addresses you're linked to, or other people you have a financial association with.

    The big gas and electricity firms do hard credit checks – these go on your file too.

    - Account data. Banks, building societies, utility companies and other organisations use credit reference agencies to share details of all your account behaviour on credit/store cards, loans, mortgages, bank accounts, energy and mobile phone contracts from the last six years.

    About 350 million records a month are tracked. The first type of information and the most common is 'default data', which shows where you're officially in default and haven't paid money you owe.

    Some lenders share 'full data' too. This can incorporate how you generally operate the account, from being the model customer to defaulting. Some credit card providers share the amount you repay too (if it's the minimum, or if you repay in full) and whether you've a promotional deal (plus if you use credit card cash advances). This can allow lenders to weed out those just playing the system.

    In addition, payday loan data is normally reported, while doorstep lenders are legally obliged to share the data that they hold on you.

    Some history from energy/phone providers. If you look to switch energy provider, or change from a prepayment meter to a normal credit meter (where you get a bill), it's likely to leave a footprint as many providers now share credit report data. 

    Fraud data. If you've committed fraud (or someone has stolen your identity and committed fraud), this will be held on your file under the CIFAS section.

  4. What lenders don't know – ignore conspiracy theories

    Many people believe every element of their life is on their credit reference files, but actually it's mainly just a strict set of financial data. Though over recent years, the information contained on them has grown.

    So let's debunk some myths. Here are a few of the more common things people think are on their files, but aren't.

    Your credit score. The three credit reference agencies, Experian, TransUnion and Equifax, have individual ways of scoring you, meaning the numbers you see may be different for each one. Interestingly, lenders don't see this score at all – it's just for you.

    Race, religion, ethnicity. These personal details about you are not held.

    Who you're married to or living with. Provided you don't have any joint financial products and are therefore financially linked, there's no information about members of your family who live, or have lived, with you or any other third parties.

    Medical record. Medical problems you may have had in the past aren't listed.

    Salary. How much you earn isn't on your file either, though you'll usually be asked on the application form.

    Savings accounts. As savings are not a credit product, they don't appear on credit files. This data is therefore only available to banks you hold savings accounts with. However, when you apply for a savings account, the provider might do a soft search of your credit report to check your ID, and do anti-money-laundering checks.

    PPI, bank charges & other reclaims. If you've attempted to, or have successfully reclaimed PPI or bank charges, it won't appear on your credit files.

    Student loans (except pre-1998 starters). Unless you've had a county court judgment against you for lack of payment, no information about 'income contingent' student loans – the type all those who started university since 1998 have – is passed on to the credit reference agencies by the Student Loans Company (see Should I repay my student loan? for a full briefing).

    Those who started university before 1998 and have the old style 'mortgage' type student loans have both defaults and county court judgments recorded with the agencies.

    Soft searches. Some lenders (and MSE's eligibility calculator) will do a soft search of your credit report, to tell you both whether you qualify to borrow from them, and what rate they are willing to give you. This isn't passed on to other lenders when they credit-check you.

    When you check your own file, it does appear on your credit report. It's not always clear, but the words "administration check" or "quotation search" should indicate something, but lenders can't see this – so it doesn't play any role in any assessment of you.

    Criminal record. No criminal convictions are listed.

    Council tax arrears, parking fines or driving fines. Councils don't share data about your payments, whether good or bad. If you're in arrears, it won't affect your credit score. However, it's always wise to prioritise your council tax payments as many councils are quick to prosecute. Council tax arrears are dealt with as a criminal matter, not a civil one, so you could end up with a criminal conviction.

    Any fines you've incurred, for example, a parking or driving fine, won't be listed. Even though they're issued by the courts, they aren't 'credit' issues, so they're not listed.

  5. Your credit report dictates the product and rate you'll get

    These days the credit landscape is all about 'rate for risk'. This means almost every credit provider on the market uses your credit file to not only dictate whether they'll provide you with credit, but also what interest rate you'll get.

    The most obvious way this manifests itself is in representative rates on loans.

    Here, only a minimum of 51% of accepted customers must get the rate advertised. They might be advertising a 6% rate (known as the representative APR). But you could be accepted and offered a 40% interest rate instead, because of a poor credit score.

    It applies to other products too. Some 0% credit cards give you a shorter 0% period if you've got a poor credit history (assuming they'll accept you), others will simply offer you a different product to the one you've applied for. This is why it's so important to manage your creditworthiness.

  6. Don't panic if your credit score drops slightly with one of the agencies. It's actually what's on your credit report that matters

    The idea that getting accepted for credit is all based on a simple score given to you by one of the credit reference agencies is false. At best, it's a guide to roughly how good or bad a risk you are. As we say above, lenders will judge you on three main criteria when you apply for credit:

    • Your application details. For example, your salary.
    • Any past dealings you've had with that lender. For example, old accounts. 
    • The info contained in your credit reference reports.

    Yet the first two aren't factored in to your credit score – so it's based on incomplete information. Plus, different lenders are looking for different things. When you apply, they assess you based on their own 'ideal customer' scorecard – and each lender is different. Just because one lender rejects you doesn't mean another will do the same. So bear in mind:

    • Rather than thinking "I have a great credit score so I'll get any credit I apply for", it's actually best to check how you stand with different lenders before you apply. A way of doing this is to use our credit card and loan eligibility calculators. That way, you'll have a better indication of which lenders are likely to accept you (and there's no impact on your ability to get credit, as there would be if you applied directly).

    • If you get lots of high percentages then you're doing reasonably well – but NO ONE is ever likely to be accepted for every card or loan. If our calculator shows you're not likely to be accepted for many cards or loans, see our tips to boost your creditworthiness

    The impact of a slight credit score drop is near meaningless

    For those looking at their score and wondering 'what is a good credit score', it's helpful to understand that each of the credit reference agencies has a different scoring range. These are as follows:

    - Experian: 0-999
    - Equifax: 0-1,000
    - TransUnion: 0-710

    Where the top credit scores are 999, 1,000 and 710 respectively, zero is theoretically the lowest score – though in practical terms it's impossible to get. If you've got no or little credit history, your score won't be zero by default, rather, your credit score simply won't exist (it'll only be generated if you go on to apply for credit).

    These scoring ranges are the same even if you're not accessing your score directly from the credit reference agency itself – for example, you're using Clearscore to check your Equifax score, or Credit Karma to check your TransUnion score.

    Anyone with a credit score should consider it inevitable that their score will drop or fluctuate at some point. This shouldn't be a cause for panic though, especially if it's only a slight dip. In general, the impact of your score going down a small amount is near meaningless. Have a watch of this video to see why: Martin Lewis explains what to do if your credit score drops
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  7. 'I am not a number, I'm a free man!' Er, not with credit scoring

    We don't have a right to be lent money. While the Government pushes lenders to offer more credit, especially in the small business and mortgage worlds, ultimately it's still a commercial decision from firms about whether they want to lend.

    This is done with a massive system of automated impersonal credit checks. It's often far cheaper for a lender to reject some people who it should be lending to than it is to accept some it shouldn't be lending to.

    You may feel it's unjust, but The Prisoner's call – "I am not a number, I am a free man" – doesn't work in credit scoring. Here you are just a number, and you have to understand that, as frustrating as it may seem.  

  8. Fraud scoring as well as credit scoring can cause rejection

    When you apply for a product, it isn't just a case of assessing whether you're desirable, but also checking the application is legitimate. So, as well as the credit reference agencies, lenders also use completely separate anti-fraud agencies to try to weed out problems.

    Here is how the two big agencies work:

    Logo of National Hunter, a service which banks and building societies use to weed out fraudulent applications

    National Hunter

    This rarely mentioned system is much less factual, and so is prone to greater errors. However, it's used by almost all major banks and building societies, receiving 96,000 applications a day, and has a real impact. 

    Logo of Cifas, a service which lists known cases of fraud

    CIFAS: Lists confirmed past fraud

    It is simply a record of known fraud, so if you're on there, in general, you should know about it. It's also the organisation to speak to if you think you've been a victim of ID fraud. Worryingly, any fraud committed at your address in the past could appear on your CIFAS file, even if it was nothing to do with you. 

    • Find out more about how National Hunter works...

      It works by looking for inconsistencies between your current application form and any past applications you've made, trying to spot factual errors. While it can't block your application itself, it triggers a red warning flag to lenders, and this happens roughly 7% of the time. Lenders can then check the info, and ignore it or do further checks. They're not allowed to reject you based on the National Hunter red flag alone.

      Factors such as a number of applications in a few days can also trigger warnings, though generally that's more acceptable with mortgages, where it's more common, than with credit cards.

      What to watch for

      It's crucial to be consistent, even over long periods, when you fill in application forms. If you have a number of job titles or phone numbers, try to use the same one on every application. 

      How to check your National Hunter file

      To check the info it holds on you, you'll need to make a subject access request, which is free thanks to the introduction of the General Data Protection Regulation in May 2018. This can also be a useful thing to do if you think you're a victim of ID fraud.

      What you'll get is essentially a list of the information you've put on past applications. If there's an error on the file, which is possible, you can't correct it directly with National Hunter. If this happens, you'll need to go back to the lender that submitted that application in the first place to have it corrected.

    • Find out more about how CIFAS works...

      As with National Hunter, a lender can't refuse your application based on the CIFAS data, but must investigate first. Hopefully, that should prove you were not the perpetrator.

      How to check your CIFAS file

      The info it holds on you should be contained on your credit report under the CIFAS section. You can do a subject access request for information CIFAS holds on you for free. Find out how to do this on the CIFAS website.

      If you've a dispute with the information it holds, you need to contact the company that logged the information on your CIFAS file first. If you're not happy with the response, you can ask CIFAS to investigate after you've received a final response letter.

  9. Credit scoring affects far more than you think

    Since the credit crunch started, the importance of credit scoring to our financial lives has grown rapidly. Here's a quick rundown of how credit scoring affects major financial areas.

    • Mortgages. If your credit score is poor, you'll be rejected. It really is that simple. If you're planning to get a new mortgage or remortgage, it's worth starting to manage your credit file at least a year in advance. For specialist help, read the free First-time buyers' mortgage guide or Remortgage guide.
    • LoansAgain, your credit score matters both for acceptance and the rate you'll pay. See Cheap loans for help.
    • Utility bills. Sharing data is now spreading to utility companies too, making it even more important to pay your bill on time, or it could harm your chances of applying for other credit such as a loan, credit card or mortgage. Of course, paying it on time can help your chances too.

      The credit agencies are notoriously secret about which firms share data on whether their customers made or missed payments.
    • Mobile phones. If you're getting a contract mobile phone, you're credit-scored (usually because the company is spreading the cost of the handset over the contract, so for the firm, it's effectively a loan). If you're rejected, you won't get a contract, and will have to stick with pay as you go.
  10. Technology is changing credit scoring, and more is to come.

    More lenders, especially fin-tech ones, are also using Open Banking (you let them access your bank account or credit card data) to assess people. It can provide more up-to-date and bespoke insights that could increase (or decrease) your ability to borrow and mean less paperwork. Expect this trend to increase over the coming years.

    Before you read how to boost your credit score, you may also want to check out...

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