A credit score is a simplified overview of your credit history, giving lenders and prospective loan providers a general idea of your previous credit commitments, repayments and reliability.
Currently in the UK, credit scores are measured by three credit reference agencies (Experian, Equifax and TransUnion), who monitor and allow you to check your credit score. Though you can also view your creditscore through credit brokers like Clearscore. Each credit reference agency who each hold secure data on individual’s credit history. This is builds up a picture t up whenever you take out credit, such as using credit cards, paying off loans or paying for contracts (like such as your phone contract or subscription services) this and gives you a score which can be negatively affected if you have previously failed to make repayments, miss a payment or have defaulted on prior credit loan.
Your credit score can affect your ability to get future credit, such as taking out mortgages loan or applying for credit cards, and can affect the types of loans or repayment options you can be offered by future lenders.
Do I have a credit score?
A credit score is created when you first create a line of credit, this happens when you first take out a loan or sign a financial agreement, like a such as taking out a phone contract, financing a payment agreement or taking loans, such as student finance and bank loans.
Once a line of credit is opened, all future credit taken out will contribute towards this overall score. If you have never taken out any form of credit or repayment option, your credit score will remain blank.
In 2021, data gathered by Experian found that almost seven out of ten Brits (69%) didn’t know their credit score.
How do I check my credit score?
Currently in the UK, you can check your credit score through Clearscore, Experian and or Equifax.
ClearScore – founded in July 2015, was the UK’s first provider of free credit scores and reports, they also offer consumer advice and protection services. The company earns revenue from financial institutions who pay ClearScore when new customers join them from the service, similar to a referral system. ClearScore is a credit broker who allow users to view their credits scores from other providers for free.
Experian – Experian remains one of the longest running credit reporting companies. Founded in 1996, the company, based in Ireland, operates across many countries and is one of the most recognised credit reporting agencies in the UK. Similar to ClearScore the company also offer additional credit services, including identity protections and web data protections. As well as credit score and reporting services, Experian also offers data protection and web security services as part of some of it’s premium tiers.
Equifax – Equifax is the lesser known of the three main credit reporting agencies, similar to Experian they offer an initial free trial period of 30 days but charge £10.95 after this trial period has ended. They also offer credit protection and internet monitoring services as part of their service.
How can I build my credit score?
A credit score is built up whenever credit is taken out and paid off on time. This can include many different types of credit, but generally includes refers to using and paying off credit cards, financing options such as phone contracts and financing through store credits or financial agreements such as Buy Now, Pay Later.
There are also some other simple ways to improve your credit score, these include:
Registering on the electoral roll: Simply being on the electoral roll, and confirming your identity and home address, can help improve your credit score. It’s free and simple to do, and a good place to start when improving your credit score.
Long standing active accounts: Having a long-standing active bank account can suggest to a creditor that you are good at managing your accounts and managing your finances over time. This is why it’s suggested not to switch accounts when attempting to take out credit or get a loan, such as a mortgage.
What can negatively affect my credit score?
Your creditor score is negatively affected whenever late payments, arrears or defaults are reported on your account. This can include failing to pay off an account on time or not paying off a credit card in full.
There are also certain forms of credit, such as payday loans and short-term lending options that can negatively impact credit score when taken out.
Credit checks being run on your account can also negatively affect your overall score.
Other things that facts can also affect your credit score , these include:
Court records such as County Court Judgements (CCJs), Defaults and debt plans such as IVA’s and Bankruptcy agreements will negatively affect your credit score for a period of up to 6 years.
Spending habits and reliance on credit can also have an adverse effect on your credit score. If you have high credit balances and are often close to your credit limit this may suggest to lenders that you are heavily reliant a heavy reliance upon credit to make ends meet.
Do I need to pay to check my credit score?
Previously, your credit score could only be accessed through paid credit check agencies: Experian, Equifax and TransUnion) however, since 2014, Clearscore has allowed people to access free credit scores and reports through their app and website.
Other services such as Experian and Equifax offer premium services and features but generally allow you to check your basic credit score for free, but. Though looking at in- depth reports and further features will require a premium, paid for subscription account., which generally costs a monthly subscription ranging in price.
What is a bad credit score?
Though each credit check agency uses their own unique measuring system to calculate credit score, they all follow a similar format. Running from very poor to excellent, a typical good/excellent credit score can range from around 850 – 900 for a good score to 950-999 for excellent.
A very bad to poor credit score can range drastically from 550-700 with a fair score being between 700 – 850. These metrics and numbers can vary significantly from credit agencies and also may not be fully accurate to your actual credit history as these are just estimates.
According to statistics provided by Experian, the average UK credit score is 759.
Is it worth paying for Experian?
Though Experian offer an initial free trial service of 30 days, and allow you to view your credit score and with a summary of your borrowing always without charge, . M many of the services and features are premium and require monthly subscriptions to access. t The costs range in tiers and can cost from £6.99 up to £14.99.
Ultimately, paying for a premium Experian account will depend on how closely you need to monitor your credit record. Since a general overview of your credit score is free, if you only require a cursory look at your credit report file then these premium features might not be required.
Can Experian boost or lower your credit score?
There are features exclusive to Experian that can affect your overall credit score, such as Experian Boost that has the potential to instantly increase your credit score using open banking to review your spending habits, with an uplift applied if you can show examples of good spending and examples of recurring payments, like such as subscription services and monthly payments.
These include tv subscriptions, phone contracts and financing options like Buy Now, Pay Later that can all show a history of responsible lending and being able to make regular recurring payments.
This you could have see an instant boost to your credit score if you have examples of the above listed payments on your account.
What to do if I have a bad credit score?
If you suffer with long term debt and continue to fall into late payments this will have a lasting impact on your credit score and an overall impact on your ability to take out further credit. If you have found yourself in a cycle of debt, with mounting debt repayments and using credit to pay off further credit, debt advice may be the option for you.
Through a debt advice service like MoneyPlus Advice, you can get tailored advice on your credit situation and help to right your negative debt habits or spending to help you get out of debt. For those with overwhelming debts, struggling with repayments, a debt management plan may be a good option to help you repay and even write off some of your existing debts.
To discuss options and get debt help today, fill out our quick debt advice form and find out in just 10 minutes if you are eligible for a debt management plan with us and start living better today.
