Understanding your credit score

BORROWING ESSENTIALS

Jump to Chapter

Introduction 1. What is a credit score? 2. Finding your credit score 3. Building your credit history

In this lesson, you'll find out what a credit score is and why it's important. 

You'll learn how you can access your own score and pick up tips on how to improve it.

KEY LEARNINGS

  • What a credit score is, and the information it's based on
  • How to find and view your credit score
  • What affects your score and what you can do to improve it

Read time:

6 mins

Chapter 1 - What is a credit score?

Chapter 1

What is a credit score?

Read time:

2 mins

What's a credit score and how is it used?

A credit score is a number that a credit reference agency gives you. It shows how reliable you are at borrowing and repaying money. This score can help banks and money lenders decide how much money they're able lend to you. A good score can help you get approved for credit cards, loans and mortgages, while a bad score can reduce the chances of getting approved. 

There are three main credit reference agencies in the UK:

Experian, Equifax and TransUnion.

ICO Opens in a new tab

Credit reference agencies use different types of information to create a credit score for you. 

 

Select each item to find out more.

  • This includes information about your existing bank accounts and if you have made repayments for credit on time in the past. It shows the credit reference agency if you can manage money well.

  • This shows the address where you're registered to vote and how long you have lived there. You can check if you're on the electoral register for your current address by contacting your local Electoral Registration Office.

  • This includes financial legal information about you, such as if you have gone bankrupt in the past or faced a court judgement or debt relief orders. 

    Declaring bankruptcy is a legal term, meaning someone (an individual or organisation) can't afford to repay any debts that they may have.

    Court judgements are decisions made in a court of law. 

    A debt relief order is another way of dealing with debts you can't pay. It means you don't have to repay certain debts for a specified amount of time. 

  • If you live in Scotland, public financial records will include any decrees, debt payment programmes and sequestration. 

    A decree is an official order that has the force of law. 

    A debt payment programme (DPP) is a government scheme in which you pay back a certain amount of your debts each month.  

    Sequestration is where someone's possessions are taken as a form of repayment. 

  • If your house has been repossessed in the past because you couldn't make mortgage payments, this will show here.

  • If you're financially linked to someone, the credit reference agencies can see it. This includes anyone you have applied for joint credit with. For example, if you own your home with your partner, you are financially linked.

  • This shows details of companies who have checked your credit score in the past 12 months. Companies will check your credit score when you apply for credit. Having lots of searches shows the credit reference agency that you are applying for a lot of credit. 

  • This shows any addresses you have been registered at previously, according to the electoral register. 

Introduction - Understanding your credit score
Chapter 2 - Finding your credit score

Chapter 2

Finding your credit score

Read time:

1 min

Access your credit score, for free

There are a number of ways to get access to your credit score and your credit report (the breakdown of the information your credit score is based on). 

It's completely free to access your credit score, but most agencies will try to get you to join a paid subscription service first. You don't have to pay a subscription to view your credit score or request a statutory (basic) credit report. 

Apply for your credit report by post

You can send an application form to a credit reference agency to get your credit score and report by post. 

The credit reference agencies will provide you with your free statutory credit report by post, which contains basic information about you that has been used to work out your credit score. 

You can get their postal address and download an application form from their websites: 

Find your credit score online

You can also sign up for an online account with a credit reference agency to view your credit score and report for free. 

The three credit reference agencies have partner websites where you can access your free statutory report.  

Experian's partner website is MoneySavingExpert Credit Club.

Equifax's partner website is Clearscore.

TransUnion's partner website is Credit Karma.

Chapter 1 - What is a credit score?
Chapter 3 - Building your credit history

Chapter 3

Building your credit history

Read time:

3 mins

What is credit history?

Your credit score, your credit report and your credit history are what lenders use to decide if they will let you borrow money. Your credit history is information about how you have managed your money and repayments in the past, and it makes up part of your credit report. 

 

What affects my credit history?

Bank account

If you have access to a bank account in your name, it shows the credit reference agencies and lenders that you can manage your money. 

If you don't have a bank account in your name, the credit reference agencies and lenders can't see if you have money coming in and they can't see if you are able to pay back money you borrow. 

Direct debits

When you have direct debits (automatic payments for bills) set up, it shows the credit reference agencies that you are able to manage your money and pay your bills. 

If you don't have any set up, it might look like you aren't paying any bills, that you can't repay money you have borrowed, or that you don't use your bank's features to manage your money. 

Repayments

If you miss repayments on money you have borrowed, or a bill payment, your credit score will go down because the credit reference agencies and lenders see you as a risk – that they may not get back the money you borrowed from them. 

Pay on time to show you're reliable and able to manage your money. This will help increase your credit score. 

Financial links

When you get credit with someone else (such as a partner, sibling or parent) for a credit card, loan or mortgage, your credit histories are linked together.

If that person does something to make their credit score go down, yours might go down too.

Electoral register

Credit reference agencies and lenders use the electoral register to check that you live where you say you do when you apply for credit. If your current address and where you are registered on the electoral register are different, your credit score will go down. 

If you move to a new house, make sure you contact your local Electoral Registration Office to update your address on the electoral register, so your credit score doesn't go down. 

If you have no fixed address, you won't be on the electoral register, so you'll need to make sure the other information about you in your credit report is correct so that your credit score is as high as it can be.

Wrong or missing credit information

If the information in your credit report or history is wrong or missing, and it's making your credit score lower than it should be, you can ask the credit reference agencies to check. This is called a 'dispute'. You can also do this if information has been on your credit history for too long. 

Use these links to dispute your credit history: 

Experian 

Equifax

TransUnion

After raising a dispute, if the information on your credit report can't be changed, you can ask the credit reference agency to add a 'notice of correction'. This is a short statement you write which will be attached to your credit report for any lenders to see when you apply for credit.

Understanding your credit score: completed!

You've now seen what a credit score is and how to find yours. You've also found out how to start building up your credit history to improve your score.

Chapter 2 - Finding your credit score

Exit lesson and mark as complete

 

Lloyds Bank Academy is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Lloyds Bank does not endorse the services they provide. The information in this module was last updated on 25th November 2024.

Back to top Click to jump to top of page