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What factors affect your credit score?

Find out about the different factors that could have an effect – positive or negative – on your credit score, and the steps you can take to improve it.

Anyone who has ever borrowed money or used credit of any kind has a credit history. This is your record of all loans and credit taken out for a variety of purposes over the years.

Your credit history is compiled by credit agencies to help give lenders an insight that guides them on whether an application should be approved and on what terms – such as the duration of the loan and the amount of interest to be charged.

From mortgages to credit cards, car finance to store cards, most adults in the UK will have had credit in some form or another to help them purchase big-ticket items. How good you are at repaying the loan on time, and whether you have missed any payments or gone over your credit limit is all recorded on your credit score. This can significantly impact the likelihood of you obtaining credit in the future, as well as impacting the terms of any future loan.

What impacts your credit score?

Demonstrating that you can pay back any money borrowed in full and on time helps to ensure your credit score is in the best possible shape. It means that any future loans you may require will be offered under more favourable terms, so it’s certainly worth understanding how to improve your credit score.

Available credit

If you currently have any outstanding credit, ask yourself whether you’re making the best use of it. Are you making regular payments on time to help improve your future credit score, or are you stretching it to the limit? When the latter sounds more like you, think about what you can do to improve your credit score. It’s much better to take action if you’re struggling than to take no action and risk falling behind with payments. Being in arrears could result in CCJs (County Court Judgements) against your name, which can make obtaining credit more difficult for years to come.

Bear in mind that lenders do keep close tabs on customers’ credit history to ensure they are borrowing responsibly. Understanding what impacts your credit score, and how to improve your credit score is important.

Duration of credit history

If you have a long credit history spanning several years, and have demonstrated that you’re a responsible borrower, you are much more likely to be offered credit at a better rate. Special offers and discounted rates often have certain conditions attached to them in the small print that rely on you having a good credit score. But if you suspect your credit score is less than perfect, or are not sure what it is and want to know more, you can contact a credit reference agency such as Experian or Equifax free of charge to find out.

The credit-referencing agency can’t decide whether or not you’re eligible to get credit, they just provide the credit score. It’s the lender themselves who will decide whether or not to approve your application, and if so under what terms, including the length of the repayment period, based on this score. So it’s worth being aware of the factors that may affect your credit score.

Payment history

What hurts your credit score the most is unpaid debt, especially if it has resulted in CCJs. Your payment history will be used to help determine your credit score, so if you’re paying on time it should be fine. If you are paying late, how late? Do you have any CCJs, debt management plans, or IVAs? Things like this will be taken into account, along with any more recent applications for credit.

What would improve your credit score?

You may be concerned that not all of the above will lead to a good credit score for you, or you might just want to make sure your record is in the best possible shape. The good news is there are some simple steps you can take now to improve your credit score, including:

Prompt payment of bills

Paying bills on time is a good way to demonstrate that you would be a safe bet when it comes to paying back credit. If you haven’t already done so, it’s a good idea to set up direct debits for your utility bills, in order to be confident you won’t ever miss a payment.

Clearing CCJs or larger debts

If you’ve been favouring the ostrich technique – burying your head in the sand and ignoring outstanding debts – take steps now to ensure you set up a repayment plan. Even a small amount each month can help clear your loans. The longer you leave a debt unpaid, the more you will ultimately have to repay, as interest builds up.

Demonstrating responsible borrowing

Applying for a credit card and being responsible with its use can demonstrate you are a responsible borrower. By taking out a credit card, spending regularly on it and making the repayments on time each month, you can quickly improve your credit rating - even six months’ worth of payments can help. It’s essential that you’re sure you can afford repayments before you apply for one.

By understanding your credit score, following our simple tips and demonstrating your ability to manage debt responsibly, you can improve your credit score. This will increase your chances of getting the best deals in future, whether you’re looking to take out a mortgage, get a new credit card or borrow money for other big-ticket items.

For more help understanding your credit score, visit the Know How blog.


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