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As specialist mortgage brokers, we are frequently asked “What is a bad credit score?” and “What is bad credit?” We explore these topics in this latest article.

In the UK, and infact, throughout most of the world, credit has a serious impact on our ability to do and buy certain goods and services. As most of us don’t have the cash to buy a house outright access to mortgages is extremely important. However, if you have a poor credit score, you may struggle to have your mortgage application approved.

What is a bad credit score in the UK?

So, what is considered a bad credit score in the UK? In this post, ams: looks at "what is bad credit" and bad credit scores, explaining how they’re calculated, what impacts your score and how to improve yours. It is important information when considering your options but remember an ams: mortgage adviser will make your work finding the right mortgage so much easier, so give us a call. If you have what is considered bad credit, we can help.

Credit Reference Agencies (CRAs)

When assessing your credit score, it’s important to keep in mind that there are three leading credit reference agencies (CRAs) in the UK. Each of these CRAs provides different credit score ranges and categories, which is their own way to define what is bad credit.

Below we have provided each CRAs credit score range so that you can see what bad credit scores are and the categories above them.

Experian credit score range

  • Poor: 300 - 579
  • Fair: 580 - 669
  • Good: 670 - 739
  • Very good: 740 - 799
  • Excellent: 800 - 850
  • Bad credit: 669 rating or below

Equifax credit score range

  • Poor: 300 - 579
  • Fair: 580 - 669
  • Good: 670 - 739
  • Very good: 740 -799
  • Excellent: 800 - 850
  • Bad credit: 669 rating or below

TransUnion credit score range

  • Poor: 487 - 526
  • Below average: 527 - 582
  • Average: 583 - 613
  • Favourable: 614 - 680
  • Good: 681 - 766
  • Excellent: 767 - 999
  • Bad credit: 613 rating or below

How is my credit score calculated?

To calculate your credit score, a credit bureau will consider your credit history and various reports. Different credit bureaus have unique ways of calculating, but generally, they consider:

  • How you pay your bills
  • The quantity of your debt
  • The period between payments, and
  • How your financial track record compares to other active credit consumers

The credit bureau will also note your employment position and history. Based on all of these findings, the bureau will translate this information into a credit score. From this, you can learn what is considered bad credit.

Why do I have a bad credit score?

When you start to interact with banks, credit unions and other financial institutions, you begin developing a financial history and portfolio. If you default on loans, take too long to pay back the credit, or go over your credit limit, your credit score will drop. Therefore, a low credit score comes from badly handled money.

Many factors can potentially affect your credit score. Here are the most common:

  • The length of your credit history 
  • Too much debt
  • Going over your credit limit
  • Bankruptcies
  • Moving houses often, indicating instability
  • Negative information, such as blacklisting or previous repossessions
  • Missing payments or not paying promptly
  • Having a joint account with someone who has a bad credit score
  • Frequently withdrawing cash from your credit card

How can I improve my low credit score?

If you have a bad credit score, here are a few ways that you can improve it:

  • Check your credit report and request any errors or discrepancies are removed
  • Consider closing old and unused credit accounts
  • Keep your credit card balances low
  • Wherever possible, reduce debts
  • Catch up on past-due accounts
  • Apply for credit only when you need it
  • Build your credit file with various active credit accounts
  • Set up automatic payments to ensure you don’t miss any or pay them late

What mortgages can I get with bad credit?

With bad credit, you may still have mortgage options available. These can include specialist bad credit mortgages, and government-backed schemes like the Help to Buy or Shared Ownership programs.

Getting approved for a mortgage can be very difficult and tricky when you have a bad credit history, so it is important to get the right advice. It is highly advisable to seek advice from expert mortgage advisors (such as ams:) that specialise in helping individuals with bad credit to explore suitable mortgage options for their specific situation.

Contacting ams:

ams: specialise in bad credit mortgage solutions, specifically designed to help those who have poor credit, defaults, IVAs or CCJs. So, if you have been struggling to find a mortgage contact us today on 0121 4000 052, because if we can’t help, then it’s not possible.