Credit Score – what is it and how do I calculate mine?

Knowing the ins and outs of credit scores can help you stay on top of yours or rebuild it if it’s been damaged. This guide runs through what credit scores are and how they are calculated, so you’re better equipped to look after yours.

    Published:25 Aug 2021


    What is a credit score?

    A credit score is a way for you to better understand, as a consumer, how lenders may view you. It is a number which represents your creditworthiness, which is considered by lenders during application for a number of financial products such as mortgages, credit cards, overdrafts and loans.

    For example, when you are applying for a mortgage, the mortgage provider (e.g. bank or building society) will review your credit file and decide whether you have the means to pay the debt back. Your credit score is a representation based on these credit files and so it can help you to determine what decision a lender might make in advance of making the application.

      Is there a difference between a credit score and a credit rating?

      Yes and no. They are both used in exactly the same way, as a method for lenders to calculate how dependable you are financially. Where they differ is how they present this information. A credit score is a number and is in three digits. A credit rating will place you on a scale. Generally in the UK we use credit scores.

        How is your credit score calculated?

        In the UK there are three main credit bureaus that generate credit scores. These are Equifax, TransUnion, and Experian. Different agencies use varying formulas to measure your credit, so there isn’t one particular way to calculate it, and it can be different depending on which agency you get your report from. Banks will also calculate their own view of an application credit score, which they often use when making decisions on lending alongside a bureau’s credit score file. Your credit rating is also constantly updated, and can change for the better or worse, if for instance you miss a payment, or reduce your debt.

        It’s also worth knowing that you may find that you have multiple credit scores that vary in number from bureau to bureau. This is because each bureau operates on a slightly different scale. Your creditors may also not report your full credit activity to all bureaus.

          How do you know if a credit score is good?

          Equifax, TransUnion and Experian all use the three-digit credit system. The higher your score, the better your credit.

          • Equifax ratings are between 0-850. A good score from Equifax is between 670-739.
          • TransUnion ratings are between 0-850. A good score from TransUnion is typically between 661 and 720.
          • Experian ratings are between 0-999. A good score from Experian is between 881-960.

          If your score is low there are simple ways you can work to improve your credit score. Learn more with our guide on how you could improve your credit rating with a credit card.

            What information is collected to create my credit rating?

            Your credit rating is calculated from data collected in your credit reports using credit cards, loan payments, and applications for either. But there are several more factors that will go into a credit score, such as instances of a CCJ (County Court Judgement) or bankruptcy.

              Your credit history

              Lenders want to be able to look at your payment history in order to determine what your payment activity will likely be in the future. If you have a track record of making payments on time, they will predict that it is likely you will continue to do so, making you a more desirable candidate for a credit product, such as a loan.

              If you don’t have a good credit history, i.e. you have missed payments, or have outstanding large debts, then you may not be considered a viable candidate to lenders. Luckily, you can learn more about ways you can improve your credit score.

                Your credit trail

                How is a credit trail different from a credit history? Well, a trail refers to the enquiries you make for credit or loans, regardless of whether you decide to go ahead with an application. Your credit report will also show any enquiries made by companies, insurance agencies and loan companies or banks. If your report shows a lot of activity regarding enquiries, it might look as though you are struggling financially or have been turned down for credit.

                  Your personal details

                  Along with your credit history, creditors like to hold some key personal details, such as your home address, salary, marital status, or whether you have any assets, such as a car or a house. The idea is the more they know about you the better idea they will have of the person they are lending to.

                    Your public record

                    This often refers to any insolvencies, judgements or bankruptcies that you may have been subject to and may damage your rating. However, you may also appear on public records that can improve your rating, such as being on the electoral register. The use of public records is also vital when it comes to identity theft.

                      How do I calculate my credit score?

                      You can’t, not personally anyway, as your score is generated by the credit agencies mentioned above – Experian, TransUnion, Equifax. However, you can request this information, and these companies are legally obliged to provide you with a copy free of charge.

                        Important information

                        The content on this page aims to offer an informative introduction to the subject matter but does not constitute expert financial advice specific to your own situation. All facts and figures were correct at time of publication and were compiled using a range of sources.

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