What is my credit score? Credit score check with Experian and Equifax explained and how to improve it

With the cost of living making life harder for most Brits, boosting your credit score could help ease your finances - especially with house buying and credit cards

On Thursday (26 May), the Chancellor Rishi Sunak unveiled a major spending package aimed at easing the crisis, but warned “it may take time” to get inflation back under control.

With finances tight for many people, now is the ideal time to check your credit score.

The higher your credit score, the more likely you are to get loans (image: Adobe)

But what is a credit score - and why does it matter?

Here’s what you need to know.

What is a credit score?

A credit score is basically a way of quantifying how reliable you are with borrowing money and paying it back.

It’s a three-digit number calculated via a points system that’s based around what appears in your credit report, otherwise known as a credit file.

This report looks at how you’ve managed your debts and bills, and includes information like:

  • your registration on the electoral register
  • how much you owe lenders, e.g. mortgages or overdrafts
  • missed or late payments
  • any county court judgements (CCJs) you’ve had
  • whether your home has ever been repossessed
  • if you’ve ever been declared bankrupt.
Your credit score reflects your entire credit history (image: Adobe)

Your credit report doesn’t include:

  • your income
  • how much money you’ve got, e.g. in savings
  • student loans
  • your criminal record
  • medical history
  • parking or driving fines
  • late or missed council tax payments

If your credit report shows you have always paid your debts on time, it will reflect well on your credit score.

Likewise, if you’ve failed to pay back loans or bills, it will lower your rating.

Your credit score may also be held back if you’ve never borrowed money before (for example, by using a credit card).

This is because it makes it hard for lenders to assess how risky it is to lend money to you.

Prospective employers can check your credit score, and it could have a bearing on your strength as a candidate (image: Adobe)

Why are credit scores important?

Credit scores are vital if you need to borrow money, for example in the form of a mortgage on a house.

All lenders will look at your score before deciding whether to agree to give you money.

A poor credit score may mean you’re rejected for a loan, or that you have to pay a higher interest rate - meaning you’re paying back more on top of what you borrow.

It could even see you struggle to rent a property or get a mobile phone deal.

And given potential employers can look at your credit score, it could even affect your chances of landing a job - especially if it’s a finance-orientated role or business.

Banks and lenders will complete hard credit checks on your credit report if you apply to borrow money from them (image: Getty Images)

How do you check your credit score?

There are three principal credit reference agencies (CRAs) in the UK who securely hold your credit history data and compile credit reports on it.

These are:

  • Experian
  • Equifax
  • TransUnion

They all score credit slightly differently, but you’ll tend to fall into the same category across all of them - so there’s no magic number for what a good score is, you just want to fall into the ‘excellent’ category if at all possible.

You can check your credit report for free across all of them (a legal requirement) - and checking it will not affect your credit score.

Your score may only be affected if you’ve been the subject of a ‘hard credit check’ - i.e. an in-depth look at your credit history by a lender.

Taking a look at it is a good idea as not only will it give you an idea of how you can improve your credit rating, but it will also allow you to dispute any information you feel is inaccurate.

  • not having the right surname on your report after getting married
  • having the wrong address
  • outstanding bills that have already been paid

If you see a loan or a credit card on your credit report that you don’t recognise, it could also be a sign that you’re a victim of fraud.

Should you find something that isn’t quite right, you should contact the CRA you got your report from to find out what the next steps are.

How can you improve your credit score?

Fortunately, if you’ve got a bad or lower than expected credit score, there are quick ways of improving it.

Even if your credit score is generally ok, these quick wins could lower the interest rate you’re offered on a loan or boost your chances of getting a big mortgage.

As recommended by Experian, here are some easy ways to improve your credit rating:

  • Register on the electoral roll at your current address - it makes it easier for companies to confirm your identity.
  • Build up credit history - you can do this by: opening a bank account (and keeping the overdraft well below the limit), getting a free or cheap-to-use credit card that you pay off on time every month (you can instruct your bank to set up a direct debit to help you do this), and taking out a small form of credit, e.g. a mobile phone contract.
  • Pay your bills on time and in full every month.
  • Keep your credit utilisation low - this is the percentage of your credit limit you use. So, if you have a limit of £2,000 and you’ve used up £1,000, your credit utilisation will be 50%. A lower percentage should help your score go up.
It’s worth checking your credit score at least once a year to ensure you’re not being defrauded (image: Adobe)

There are also several ways to maintain your credit score once you’ve improved it:

  • If you need a loan, don’t apply to different providers at the same time - as we’ve already mentioned, every hard credit check appears on your credit report. Multiple hard credit checks from lenders could suggest you’re overly reliant on credit and may lead the lender to think you’re in financial difficulty (even if that’s not the case).
  • Close unused accounts - it may make it appear as if you have too much credit to handle.
  • Keep up with payments - several missed payments could suggest your relationship with a company has broken down, putting prospective lenders off letting you borrowing money from them.
  • Only borrow what you know you can afford - debt, CCJs, or bankruptcy stay on your credit report for up to six years and will severely damage your score.

Keep an eye out for fraud - fraudsters could negatively impact your credit score by, for example, taking our credit cards in your name and not paying them back. Keep an eye out for this type of activity on your credit report.