If you’re managing your finances as an adult, you’ve probably come across the term ‘credit score.’ You may have seen it while applying for a loan or tried to check your score online, only to be left wondering what to do with that three-digit number. Well, don’t worry — we’re here to help you understand what a credit score is, how it’s calculated, and most importantly, how to improve it.

‍

What is a Credit Score?

‍
Your credit score is a number that indicates to lenders how well you manage your money. It’s generated by credit reference agencies (CRAs) using the information from your credit report. Lenders use your credit score when you apply for credit — whether it's for a mortgage, credit card, overdraft, personal loan, or car financing—to assess how reliable you are when borrowing money.

‍

Understanding Credit Reference Agencies (CRAs)

‍
In the UK, there are three main CRAs: Experian, Equifax, and TransUnion. These agencies collect and hold information about your financial history. Each CRA uses a slightly different scoring system to calculate your score, which we’ll break down later in this article.

‍

What’s in a Credit Report?

‍
Your credit report is a record of how you’ve managed and repaid debt. It can include:

• Your registration on the electoral roll
• Your outstanding debts (including joint loans, mortgages, and overdrafts)
• Missed or late payments
• Any County Court Judgments (CCJs)
• If you’ve ever been declared bankrupt

It’s worth noting that things like your income and savings don’t directly affect your score.

‍

‍

Why Does a Good Credit Score Matter?

‍
A higher credit score generally means you’re more likely to be accepted for credit, though it’s never a guarantee. It can also affect the interest rates you’re offered, your ability to get a mortgage or rent, and even job opportunities. In some cases, employers may check your credit report (with your consent), particularly for roles involving money management.

‍

What Counts as a ‘High’ Credit Score?

‍
Each of the three CRAs has its own scoring system, so what counts as a high score can vary slightly. For more accurate information, we recommend visiting the individual CRA websites.

‍

‍

How to Improve Your Credit Score

Now that you know what affects your score, let’s look at practical ways to give it a boost:

• Pay bills on time: Late or missed payments can hurt your score, so staying on top of your payments is key.
• Manage your accounts well: Stick to your credit limit, keep your credit usage low compared to your limit, and work on reducing debt where possible.
• Register to vote: Being on the electoral roll helps prove your identity and boosts your score.
• Check your CRA details: Make sure the information they hold is accurate, especially if there are any errors.
• Use a mix of credit: Having different types of credit, like credit cards, loans, and mortgages, can show lenders you can handle a range of financial responsibilities.
• Limit credit applications: Too many credit applications in a short period can make you seem overly reliant on borrowing.
• Only borrow what you can afford: Borrowing within your means shows lenders you’re responsible with credit.

‍

Improving your credit score takes time, but with patience and consistency, you’ll see results. Start taking small steps today, and soon enough, you’ll be on your way to better financial opportunities!