What is considered a good credit score?

If you would like to apply for a loan, you should first check your creditworthiness. This way you can determine whether you have a good chance of being approved and whether you have good conditions before you submit an application. But what is a good credit score? We explain how the credit score is calculated, where you can check it yourself, and what you can do to improve it.

A credit score, also known as a credit rating, is a three-digit number that indicates to lenders how trustworthy you are with managing your money and finances. It is derived from your credit history, but the score is not consistent across all sources. Depending on the agency providing the score, it can vary between 0 and 999. Therefore, the number for a good credit score is not standardised.

A higher score means lenders see you as a low risk. Therefore, if you have a good credit score, your chances of getting a new credit card, applying for a loan or a mortgage are much better than with a poor credit score. On top of that, if your score is not only good but excellent, it means you’re even more likely to be accepted and you also may be offered better rates.

A credit check usually involves checking your credit report. All potential risks associated with offering you credit will be highlighted. Your lender will always carry out a credit check if you’re applying for any type of credit. It is part of their decision-making process. Your credit rating can also be checked by utility companies and other service providers, landlords, and letting agencies. Some well-known credit reference agencies (CRAs) that are used by banks to check your credit rating include TransUnion, Experian, and Equifax.

Your credit score is no random number. Each credit reference agency will collect information about you from public records, from lenders, or other service providers. Depending on the company or agency, different aspects will be taken into account to calculate your credit score. Therefore, there is no general rule for how your credit score is calculated, however, there are some aspects most CRAs may be looking for, including: 

• The amount of debt you owe

• How many times you have applied for credit 

• Whether you pay your bills on time

• The length of your credit history and how much information is available 

• Whether you’ve ever defaulted on your credit agreements 

• If you’ve ever declared bankruptcy

There are usually five categories in which the best-known credit reference agencies will score your credit: 

• Excellent: Low-risk, should easily qualify for the best rates and deals.

• Good: Likely to be approved for credit with favourable terms.

• Fair: Average, may not get the best credit deals.

• Poor: Below average, likely to struggle with credit approval.

• Very poor: High risk of credit rejection.

Each credit reference agency uses a different numerical scale. This means that your credit score will be different, depending on which CRA determines it. However, since all base their score on your financial history, you will likely fall into the same category across the board. 

Here are the credit score ranges and categories from three of the UK’s largest CRAs:

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

In the UK, it is your legal right to check your credit score for free. All three of the main CRAs  – Experian, Equifax, and TransUnion – offer you a possibility to get your scores and regular updates. Usually, you need to sign up for a free account to get your credit score, but you can also choose a paid subscription to get more detailed reports and monitoring. 

It can also be very useful to request your full credit report. It includes all the information the credit reference agency has collected about you. You can use it to check what lenders and providers might see and whether there are any errors on your credit history. To obtain a comprehensive understanding, it is advisable to request your credit report from multiple credit reference agencies and compare the information across them.

Your credit report is free as well, but you might be required to start a 30-day trial period on a subscription plan. Just be sure to cancel your subscription before the trial period is over if you don’t want to utilise the rest of their services.

There are many things you can do to get a higher credit score. However, improving your credit score can be a process that takes time. Here are some suggestions for how to improve your credit score: 

• Paying your bills on time: This includes credit repayments, utility and all other bills. This shows potential lenders that you can handle money responsibly.

• Account management: Make sure to always manage your accounts well. You should stay under your credit limits and try to reduce debit balances whenever possible. 

• Limiting application: If you’re lending money from a company or bank, e.g. for a mortgage, the lender will – whether or not you’re accepted – do a hard credit check. This includes reviewing your credit report and will leave an impact on your credit score. Therefore, you should not make a number of full applications within a short period of time. 

• Build up your credit history: If you have little or even no credit history, it is more difficult to score you and usually results in a lower credit score. If you want to build up your credit history, you can, for example, start by applying for a secured credit card, use it responsibly by making small purchases, and consistently paying off the balance on time each month.

• Registering to vote: Make it easier for companies to confirm your identity by registering on the electoral roll at your current address.

To avoid getting a poor credit score, you should keep the following things in mind. They can damage your credit score and result in bad credit. 

• Missed or late payments: Your payment history is one of the most significant factors. Late or missed payments on credit cards, loans, or utilities will lower your score. 

• Bad account management: If there are any arrears, missed, late, or defaulted payments, or if you ever go over the agreed credit limits, service providers and lenders will report it. This affects your credit score. 

• Lots of applications: Frequent applications for credits in a short period of time signals to lenders that you’re seeking a lot of credit and can result in a poor credit score.

• Bankruptcy or foreclosure: Major financial setbacks, such as filing for bankruptcy or losing a home to foreclosure, can severely damage your credit score. 

• High credit utilisation: Using too much of your available credit, for example, having a credit card balance close to the limit can negatively impact your score.

• No credit history: A common misconception is that a short credit history means a good credit score. If you’ve never applied for credit in the UK, lenders may have little information about you. This lack of credit history can result in a poor credit score, making it harder to secure a mortgage or other loans.

Having a good credit score can involve many benefits for you. For example, the higher your credit score is, the more likely it is that your application for a mortgage, credit card, personal loan, or overdraft will be accepted. Sometimes, you will also profit from lower and longer-lasting interest rates, since they are more likely offered to low-risk applicants. Therefore, always make sure to show to a potential lender that you can manage credit responsibly. Additionally, with a good credit score, you could be offered a higher amount of credit, while having a bad credit score might affect your ability to get some jobs, e.g. in legal or financial services.

Now that you understand what a good credit score is and how it can benefit your financial health, it’s also important to ensure you're maximising your savings potential. At Raisin UK, we offer competitive rates on fixed rate bonds, helping you grow your savings while maintaining a strong financial foundation. Getting started is simple: just register for a free Raisin UK Account, apply to open a savings account, and deposit your funds to begin earning more.