Your credit score is more than just number. It’s a summary of your credit behaviour and it gives lenders and service providers information about how likely you are to pay back what you’ve borrowed.
In the UK, your credit score can influence many things from the interest rate you’re offered to whether you can secure a mortgage.
Understanding your credit score, how it’s calculated and why it matters can help you make informed financial decisions, from saving for a home deposit to planning your next move on the mortgage ladder.
What is a credit score?
At a glance:
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![Hodge_Growth [Gold] icon](https://hodgebank.co.uk/wp-content/uploads/2024/07/Hodge_Growth-Gold-1-90x0-c-default.png)
Credit scores are created by UK credit reference agencies
These include Experian, Equifax and TransUnion
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Lenders check your credit score when you apply for borrowing
It forms part of their decision-making process
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A good credit score can improve your borrowing options
A good credit score in the UK may increase your chances of approval and access to better interest rates
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A lower credit score can limit your choices
A low credit score may mean fewer options or higher borrowing costs
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Credit scores change over time
Credit scores are not fixed numbers and will change over time based on your financial behaviour and other information reported to various credit reference agencies
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You don’t have just one credit score
Each credit reference agency uses its own scoring system
How a credit score is calculated
Your credit score is calculated using data collected by credit reference agencies such as Experian, Equifax and TransUnion. These agencies gather information from lenders, service providers and public records to create a credit score.
Lenders, including Hodge, will also carry out their own checks when you apply for borrowing, including affordability assessments.
As each agency uses a different scoring model, you don’t have one universal score. However, the principle is the same: higher scores may ndicate a lower risk, while lower credit scores can highlight some financial risk to lenders.
This phase may also feel strong to some readers, while it is true, could we consider softening the tone.
To determine your credit score, credit agencies typically assess:
- How reliably you repay borrowing
- How much credit you use
- How long you’ve held credit accounts
- How often you apply for credit
Factors affecting credit score
Some of the most important factors affecting your credit score will be:
- Payment history
Missed or late payments can reduce your score. Lenders report arrears, missed or defaulted payments, and instances where you exceed agreed limits.
- Credit use
If you already using a high proportion of available credit or carry a lot of debt, it can imply you’re reliant on credit.
- Length and types of credit history
Having a mix of credit accounts shows you can manage different types of borrowing, while longer-established accounts may also help.
- Credit applications
Multiple applications in a short period can negatively affect your score.
- Public records
CCJs, IVAs or bankruptcy may negatively affect your credit score for up to 6 years.
- Electoral roll
Being on the electoral roll can help improve your score as it helps confirm your identity and address.
Why does your credit scores matter when borrowing?
When you apply for credit, lenders contact their chosen credit reference agencies to review your credit record. This highlights potential risks and helps determine whether to approve your application.
Your credit score matters because it helps lenders decide:
- Whether to approve your application
- What interest rate to offer
- How much you can borrow.
For mortgages, your credit score is considered alongside factors such as income, affordability and deposit size. Even with savings, a lower credit score could limit your borrowing options..
As a specialist mortgage lender, Hodge looks at applications on an individual basis, considering credit history alongside affordability, income and overall financial stability. Credit scores are one part of the wider picture and assessment typically focuses on stability rather than any single number in isolation.
What is a credit score range and meaning?
Each credit reference agency uses a different scale.
Below is an example of scores used by Experian:
| Excellent | 1121 to 1250
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More likely to be offered the best credit cards, loans and mortgages (but not guaranteed) |
| Very Good | 1001 to 1120
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Likely to access most credit cards, loans and mortgages (though not always the best rates) |
| Good | 861 to 1000
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A wide range of borrowing options may be available, sometimes at higher interest rates. |
| Fair | 641 to 860
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More likely to have a limited range of credit options which may be at a higher interest rate, and lower borrowing limits. |
| Low | 0 to 640
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Borrowing may be more difficult, and interest rates could be high. |
How to improve your credit score
Credit scores can change over time depending on personal cirucmstances, how accounts are managed and how credit is used. There are some positive habits that can help improve your score, including:
- Paying bills and credit commitments on time
- Keeping balances below agreed credit limits
- Limiting new credit applications
- Checking your credit report for errors.
Having access to savings may support financial stability during unexpected changes in income or expenditure, helping you to manage finances more consistently and avoid missed payments. Lenders may also consider savings alongside credit history when reviewing applications.
Find out more about Hodge savings accounts here.
Credit score FAQ's
Managing accounts well, paying on time and limiting applications can help improve a low score over time. Visit Experian for helpful advice on ways to improve your credit score over time.
Payment history, credit use, applications, length of history and public records tend to have the biggest impact.
Opening a savings account doesn’t usually affect your credit score, as it isn’t a form of borrowing.
People choose to review their credit score regularly, particularly before applying for credit or a mortgage.
You can usually check your credit score for free through the main UK credit reference agencies or trusted financial services providers.
Checking your own credit score doesn’t affect it. Regular checks can help you understand your financial position and prepare for borrowing, particularly if you’re planning a mortgage application.
The range will vary by agency, but higher scores generally indicate lower risk.
It’s calculated by credit reference agencies using information from lenders, service providers and public records.
A credit score is a three-digit number which represents your credit history and is calculated based on your credit report. It indicates the likelihood of repaying borrowed money.
This article is correct at time of publishing and for general information purposes only. We recommend you speak to a professional financial adviser for advice. You can find a financial adviser and further personal finance information at unbiased.co.uk.
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