Understanding your credit rating

Understanding your credit rating

What is a credit rating?

Your credit rating (also known as a credit score) shows how well you've managed your borrowings, based on your credit report over the last six years. 

It's calculated by Credit Reference Agencies (CRAs), and is one way for lenders to understand your past and present borrowing behaviour to help them assess how risky it would be to give you credit.

Make sure you check your credit rating regularly so you can see all the information about you is correct and spot any potential errors. Here's how you can check your credit rating.

Find out how the sensible use of a credit card can help you build a positive credit history.

Stay on top of your credit rating

There are a number of factors that can affect your credit rating. But making sure you avoid the below will help keep your credit rating on top form:

  • missing or making late payments
  • making too many credit applications in a short space of time
  • joint accounts with someone with a bad credit record
  • properties where a previous occupier has had bad debt and not updated their address
  • going over your credit limit
  • defaulting on credit agreements
  • frequently withdrawing cash from your credit card
  • not spotting mistakes on your credit file
  • not being on the electoral roll
  • moving house too often

What you can do to improve your credit rating

The best way to improve your rating is to stay on top of your finances – here are a few tips that have helped other customers:

  • always make credit payments on time
  • stick to your credit limit
  • get on the Electoral Register
  • settle any outstanding CCJs or credit agreement defaults
  • spread out your credit applications, so they're not over a short space of time
  • For even more ways to improve your rating, read our guide to improving your credit score.

Get personalised credit tips with our Credit Builder tool

Our Credit Builder tool is a great way to learn how to improve your credit rating. It'll help you understand what can impact your credit rating, and by answering just a few simple questions, you'll get personalised tips which can help build your rating.

What are Credit Reference Agencies?

Credit Reference Agencies (CRAs) are independent organisations that hold information about you to help banks, building societies and credit companies decide whether you're likely to pay back the money you borrow.

Different Credit Reference Agencies have slightly different methods for working out credit scores, so yours may differ depending on which agency you choose. It’s worth checking your score through different agencies.

There's a variety of providers you can choose from, but the three main credit referencing agencies are:

Experian TransUnion Equifax

How lenders assess credit applications

When you apply for credit, lenders will assess or score your application to understand the risk of lending to you. They won't just use your credit rating to do this, they'll look at a range of information. It'll include the details on your application, information based on how you've managed your accounts with them and whether you've repaid any previous money you've borrowed.

Does a good credit rating guarantee I'll be accepted for credit?

Remember, a credit rating is just one indicator of how credit-worthy you are. It’s not the only factor in the decision a lender makes.

Having a top score won't automatically mean you get the best credit card rate. But it's certainly a positive indication that you're doing all the right things in managing your finances.

Credit rating? Credit scoring? Credit report?

You’ll see a lot of different terms being used when talking about credit ratings. Here’s what they mean.

Credit rating

A credit rating (also known as a credit score) is a number that shows how well you've managed your money based on your previous credit history. It's calculated using the information in your credit report.

Credit scoring

Credit scoring is all about trying to predict your future behaviour based on your financial history. Credit Reference Agencies and lenders have different ways of scoring.

Credit report

A credit report (also known as a credit file) is a record of your credit history compiled from a number of sources, including banks, credit card companies, collection agencies and governments.

Statutory credit report

Everyone is entitled to a one-off statutory credit report from a credit referencing agency. It contains public and private information recorded in your name over the last six years.