What is a Good Credit Score in the UK?
- 1 Benefits of Having a Good Credit Score in the UK
- 2 What makes a Good Credit Score in the UK?
- 3 Improving your Credit Score in the UK
- 4 Maintaining a Good Credit Score in the UK?
Lenders use a credit score to measure an individual’s creditworthiness.
The higher your credit score, the higher the probability that lenders will perceive you to be a low financial risk. When you apply for a loan, credit card, or a mortgage with an excellent credit score in the UK, you have a fat chance of getting approved and avail better interest rates.
Different lending organizations judge potential customers on several various factors. The three well-known Credit Rating Agencies (CRA) in the UK are Experian, Equifax, and TransUnion. These agencies record your credit history and drum up a credit score based on the information on your credit report. Be sure to check your credit score so that you can make a well-informed choice before you apply for credit.
Benefits of Having a Good Credit Score in the UK
An above-average credit score is highly likely to solidify your position as a low financial risk in the eyes of the lenders, which, in turn, will increase your chances of approval. These are some of the advantages of having a good credit score in the UK
If your lender perceives you to be a low risk, lenders are likely to offer you better interest rates, which will ultimately make the process of repaying the loan significantly cheaper.
Higher Credit Limit
Having a good credit score in the UK increases your chances of availing more significant loan amounts, which are bound to help you achieve your financial goals soon.
What makes a Good Credit Score in the UK?
When you apply for credit, every lender will verify your credit score from the CRAs and then decide to afford you credit. There exists no standardized way of calculating your credit score as each lender uses a different approach.
That being said, the following is what Experian considers to be a good credit score in the UK and what you can avail depending on your credit score.
- Excellent (961 – 999)
You should have no problem getting the best credit cards, loans, and mortgages. However, there are no guarantees.
- Good (881 – 960)
You will have no problem getting your hands on most credit cards, loans, and mortgages, but the very best deals may be out of your reach.
- Fair (721 – 880)
You may be able to get average interest rates, but your credit limits will most likely not be very high.
- Poor (561 – 720)
You might be able to avail credit cards, loans, and mortgages. However, they may be of higher interest rates.
- Very Poor (1 – 560)
You are very likely to get rejected for most credit cards, loans, and available mortgage applications.
Improving your Credit Score in the UK
While there isn’t an exact formula to improve your credit score in the UK, there are a few steps you can take.
However, keep in mind that it will take time for it to reflect on your credit report.
Register on the Electoral Roll at your Present Residential Location
Lending organizations should have no problem confirming your identity and your permanent address if you register yourself on the electoral roll.
Pay your Accounts on time and in full Every Month
To have a good credit score in the UK, be sure to pay your bills on time without defaulting on the amounts. Lenders will very likely perceive you to be a responsible individual and of low risk.
Keep your Credit Use to a Minimum
Your credit utilization is a measure of the credit limit you use. Lower credit utilization can increase your credit score. CRAs such as Experian suggest you maintain your credit utilization at 25%.
Maintaining a Good Credit Score in the UK?
Having a decent credit score makes it much easier to improve and maintain it. Here is how to do it:
Reduce the Number of Credit Applications you make
It is highly recommended that you do not apply for credit frequently over a short duration as lenders may find you to be extremely reliant on credit and, in turn, a high financial risk. Each application you provide will be reflected on the credit report.
Close your Unused Accounts
To maintain a good credit score in the UK, be sure to close your unused bank accounts because the lenders may perceive you to be a high financial risk and think you will be unable to handle more credit if your credit amount is too high.
Ensure Timely Payments
Defaulting on your payments will affect your credit score negatively. Your lenders will label your account, as shown below:
- Delinquent Account
Accounts are typically termed delinquent when you make payments past the deadline.
- Defaulted Account
Accounts are termed defaulted when you miss several payments. This affects your relationship with the lender, making it difficult to prove that you are trustworthy.
Be sure to Always Borrow Within your Means
Maintaining a good credit score in the UK requires you to borrow credit that you know you can pay back on time. If you apply for an amount that is more than you can afford, the chances of getting into debt are much higher.
This will be laid out on your County Court Judgment (CCJ) report, which is added to a public database. Lenders check this database before affording credit to the applicant. This information stays on the CCJ report for up to 6 years.