Are you wondering, "What is a good credit score in the UK?" Well, your credit score plays a crucial role in your financial life. It reflects your creditworthiness and affects your ability to obtain loans and mortgages.
A credit score is a way for lenders to assess how reliable you are with your money and how likely you are to repay borrowed money. In the eyes of a creditor, the higher your score is, the more likely you are to receive a loan or mortgage.
Because you’re viewed as reliable by creditors, you’ll also receive more perks regarding interest rates and generous loan offers.
On the other hand, a bad credit score can affect your chances of getting a mortgage, as well as increase your interest rates.
So, how do you know if you have what is a good UK credit score? And what if you don’t? We’ll discuss what is an excellent credit score and how you can increase yours.
How is credit score calculated?
A credit bureau will calculate your credit score based on your credit history and reports. While each bureau has a unique way of calculating your score, they generally take into consideration how you pay your bills and the period between each payment, how much debt you have, and how your financial track record compares to other active credit consumers.
Your credit score is only one aspect of your credit report. Bureaus will also note your employment position, your financial history, and any information the organisation already has about you.
Based on all of the information above, the bureau will translate its findings into a score. This is known as the credit score.
What is a good UK credit score?
When it comes to accessing what is a good credit score in the UK, you need to take into account the fact that there are three leading credit reference agencies (CRAs), each of which provides you with varying credit scores categorised as very poor, poor fair, good and excellent. What is considered a good credit score by each CRA is listed below:
- 881-960 is considered good for Experian
- 420-465 is considered good for Equifax and
- 604-627 is considered good for TransUnion
Below you’ll find credit scores from each of the agencies. Any score that falls below the ‘fair’ range may be considered bad credit.
Experian credit score range
Experian, the largest CRA in the UK, credit score ranges from 0-900.
- Fair: 721-880
- Good: 881-960
- Excellent: 961-999
Equifax credit score range
Equifax credit score ranges from 0-700.
- Fair: 380-419
- Good: 420-465
- Excellent: 466-700
TransUnion credit score range
TransUnion, formerly known as Callcredit, credit score ranges from 0-710. It’s also the UK’s second-largest CRA.
- Fair: 566-603
- Good: 604-627
- Excellent: 628-710
What are average credit scores in the UK?
Establishing an average credit score in the UK can be complicated because of age groups and demographics. Each postal code in the UK has varying credit scores. However, if we assess the average score from Experian UK, the UK’s average score reached 797 in 2021. This is an improvement from 792 in 2020, yet it is still seen as a fair credit score.
What is an excellent credit score in the UK?
Looking at the values above we can see that excellent credit scores are:
- 961-999 for Experian
- 466-700 for Equifax and
- 628-710 for TransUnion
What is a good credit score to buy a house in the UK?
When a lender is considering offering you a loan, they will review your credit score, and based on their own requirements, they will assess whether you approve of a mortgage or not. Ideally, you will have what is considered a good credit score (somewhere between fair and excellent) in order to receive higher perks, like lower interest rates and larger loans.
If you are worried about bad credit affecting your mortgage, it is best to speak to one of our specialists.
What impacts your credit score?
As you start interacting with financial institutions, like banks and credit unions, you’ll start to develop a financial portfolio and history. The following factors have the potential to affect your credit score and move towards what is a good UK credit score:
- The length of your credit history – have you just started using a credit card and applying for loans?
- Too much debt – have you accumulated too much debt that you can’t pay back?
- Negative information – have you appeared in court for blacklisting?
- Missing payments or not paying promptly
- Going over your credit limit
- Moving houses too often – lenders assume you are less stable
- Having a joint account with someone who has a bad credit score
- Bankruptcies
- Frequently withdrawing cash from your credit card
How can you get a good credit score?
Having a good credit score is not only important for buying a home or car, but it can even affect what you pay for insurance. However, if you currently have a low credit score, some factors can help improve your score from what are average credit scores.
- Keep your credit card balances low – If you tend to spend over your credit limit, only then consider extending the limit
- Consider closing old and unused credit accounts
- Catch up on past-due accounts
- Apply for credit only when you need it
- Build your credit file – you need to build a credit score through various active credit accounts
- Don’t miss payments – an ideal solution is to set up automatic payments, such as with gym memberships and subscription services
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