A credit score is a quick summary of how risky you might look to a lender, based on the information in your credit report. It influences whether you are accepted for credit and sometimes the rate you are offered. Understanding what feeds into it helps you make decisions that protect your financial reputation over time.
In this guide, V5 Solutions separates the factors that help your score from those that harm it, clears up some common misunderstandings and explains how to check and correct your report.
Where Does Your Credit Information Come From?
Three credit reference agencies hold most UK consumer credit data: Experian, Equifax and TransUnion. Banks, card providers, mobile networks and other companies share information about your accounts with one or more of them. Not every lender reports to all three, which is one reason your report and score can vary between agencies.
When you apply for credit, the lender reviews the report and combines it with what you tell them, such as your income and outgoings. Each lender applies its own criteria, so there is no single universal score that decides every application.
What Helps Your Credit Score?
- A consistent record of on-time payments. Payment history carries more weight than anything else. Months and years of payments made by the due date build a strong picture.
- Low balances relative to your limits. This is known as credit utilisation. Using a small proportion of your available credit suggests you are not reliant on borrowing.
- An established history. Older accounts that have been well managed give lenders evidence of reliability over time.
- Electoral roll registration. Being registered at your current address helps lenders verify your identity and reduces the risk of fraud. You can register online in a few minutes.
What Can Harm Your Credit Score?
- Late or missed payments. These are recorded against the account. Defaults and County Court Judgments are more serious and remain visible for six years.
- Balances close to your credit limit. Running cards near their maximum, even while paying on time, can suggest financial strain.
- Several hard searches close together. Each formal application is recorded and visible to other lenders. A cluster of them can be read as a sign of difficulty.
- Financial links to someone with a poor record. A joint account or joint loan connects your file to the other person's. When you no longer share finances, ask the agencies to remove the link.
What Does Not Affect Your Score?
Some worries are unfounded. Checking your own credit report has no effect. Soft searches, used for quotes and eligibility checks, do not affect your score either. Your salary and savings balances are not recorded on your credit file, although lenders may ask about them when assessing affordability. Living at the same address as someone with a poor history does not affect you unless you share credit with them.
For more on how searches work, see our article on what borrowers need to know about no credit check loans.
How to Check and Correct Your Credit Report
- Request your free statutory report, or sign up for free online access, from each of the three agencies.
- Confirm that every account, address and payment status is accurate.
- Raise any errors directly with the agency, which will investigate with the company that supplied the data.
- Where information is accurate but needs context, add a notice of correction of up to 200 words.
Can You Borrow With a Lower Credit Score?
Some lenders weigh up more than your credit history. V5 Solutions provides loans secured on your vehicle, with decisions based on the vehicle's value and the affordability of the repayments, and bad credit is considered. A soft search gives you a personalised quote without affecting your score. Our logbook loan FAQ answers common questions.
Because this type of credit is secured and generally more expensive than mainstream borrowing, it is important to compare options first, as explained in our guide to the cost of borrowing. This article is general information, not financial advice. If debt is already a worry, National Debtline and Citizens Advice offer free, impartial and confidential help.
Your car may be repossessed if you do not keep up repayments on a loan secured against it.
