Credit scores are confusing! But without a good one you might not be able to get a mortgage, credit card or loan or even a phone contract. Those with top scores get better deals when it comes to borrowing money too.
In this guide, I’ll explain why credit scores are different, what you need to know about improving them and how to do it.
Key takeaways
- Your credit score helps lenders decide whether to offer you products such as mortgages, loans and credit cards and borrowers with stronger credit histories may qualify for better deals.
- Scores can vary between Experian, Equifax and TransUnion because they may hold different information and use their own scoring systems, ranges and update schedules.
- You can strengthen your credit profile by checking your reports for errors, registering to vote, paying bills on time, keeping card balances manageable and limiting unnecessary credit applications.
What is your credit score?
It’s a score that’s given to you by one of the three main credit reference agencies that reflects how good you are with credit.
The three main firms in the UK are Experian, Equifax and Transunion.
Lenders use it to judge whether they want to give you credit.
The better your score the more likely you are to get a top credit deal, mortgage or even a phone contract.
Why does your credit score look different everywhere you check it
If you’ve noticed your score is different between providers, then don’t worry you’re not alone. Each reference agency has a slightly different method, with some old information, updates at different times and uses alternative calculations.
Transunion has also recently replaced its old score out of 710 with a new 0-999 scale and uprated how it assesses financial behaviour, so your number - or even overall rating bands - may have changed.
Five credit score myths explained
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Myth: Having no debt means you’ll have a perfect credit score
Having no debt is not the same as having a strong credit history. If you’ve never borrowed money or had credit, then lenders don’t have any evidence of how you manage repayments. Borrowing money and paying it back on time can boost your score!
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Myth: Your partner’s credit score automatically affects yours
Getting married, living with somebody or sharing an address does not link your credit files. Your partner’s finances may become relevant if you hold a joint financial account, such as a mortgage, loan or bank account, because this can create a “financial association” and lenders may consider both credit histories. If a joint account has been closed and you no longer share any borrowing, you can ask the credit reference agencies to remove the association.
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Myth: Being on the electoral roll makes no difference
Registering to vote can help your credit profile because it allows lenders and credit reference agencies to verify your name and address. Make sure you register again whenever you move home, as an old or missing electoral-roll entry could make identity checks more difficult. Being registered will not guarantee that an application is accepted, as lenders consider numerous other factors.
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Myth: Having an application rejected directly lowers your credit score
The rejection itself is not recorded on your credit report, so other lenders cannot see that you were turned down. However, a full application usually leaves a hard search, and several hard searches within a short period can affect your score or make lenders think you are urgently seeking credit. Use eligibility checkers that conduct soft searches before applying where possible, and avoid repeatedly applying after a rejection without first checking what may have caused it.
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Myth: Your score should be identical everywhere you check it
Experian, Equifax and TransUnion may hold slightly different information, receive updates at different times and use their own scoring models, ranges and rating bands. Even two services using data from the same credit reference agency can sometimes display different scores if they are using different versions of its model. Focus on whether the underlying information is complete and accurate rather than comparing the headline numbers directly.
How to improve your credit score
Follow our checklist to help improve your score:
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Check your credit reports with Experian, Equifax and TransUnion, as each may hold slightly different information. Challenge anything you do not recognise or believe is incorrect.
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Register on the electoral roll at your current address. This helps lenders confirm your identity and where you live.
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Pay bills and credit repayments on time. Setting up direct debits or payment reminders can help you avoid missed payments.
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Reduce credit card balances where possible. Using a high proportion of your available limit may count against you.
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Avoid making several credit applications within a short period. Use soft-search eligibility checkers before submitting a full application.
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Build a reliable repayment history. If you have little or no credit history, responsibly using and repaying a small amount of credit can demonstrate that you can manage borrowing.
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Think carefully before closing old accounts. A longstanding, well-managed account can demonstrate stability and help keep your overall credit utilisation lower.
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Check your financial associations. Ask the credit reference agencies to remove an ex-partner or another person if you no longer share any joint financial products.
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Add a Notice of Correction if there are unusual circumstances you want lenders to consider. Although this may mean future applications require manual review.
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Give it time. Bad credit or negative information such as missed payments, defaults and court judgements can normally remain on your report for six years, but consistent responsible borrowing can gradually improve your credit profile.
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