What is a credit score?

Your credit score is a rating based on your personal financial history. It helps lenders decide how creditworthy you are, and whether they’re prepared to lend you money in the form or a loan, mortgage or credit card.

There are three credit reference agencies (CRAs): Experian, Equifax and TransUnion. They take your financial history and use it to put together a credit report. The information in that report is then used to create a credit score for you.

What do lenders do with my credit score?

Before saying yes to giving you a personal loan, credit card or other form of lending, lenders such as Post Office have to make sure you’re not too much of a risk. They need to be confident you’ll pay back the loan or balance on time and in full – or in the minimum amounts required along the way.

To do that, they contact the credit reference agencies to get your credit score, which shows how well you’ve managed the credit you’ve been given so far. Based on that, they’ll make their decision. There’s more on what contributes to this score in our FAQs section below.

Why is it important to have a good credit score?

The higher your credit score, the less of a risk you are to lenders and the more likely they’ll be to loan you money or issue you with a credit card, or to give you a better interest rate.

If you use credit regularly and responsibly, it’s likely you’ll have a high credit score. But this score isn’t set in stone. It can go up or down, depending on how you’re managing the credit you have right now.

Experian, Equifax and TransUnion have different scoring ranges. Your score might be different with each agency. It’s possible to have two different scores from two different agencies that indicate whether you’re a high or low credit risk. Check our common questions section below for what counts as a good or bad credit score.

How to check your credit score for free

You can use free checker tools from card providers, such as CreditWise from Capital One, to check your credit score.

It’s also free to access the full credit report and credit score the credit agencies hold on you. Just visit their partner websites:  Experian MSEs Credit Club, Equifax ClearScore, TransUnion Credit Karma. You can also request a paper copy of your credit report if you prefer. Try to do a credit score check and review your credit report held with each of these agencies regularly, at least once each year. Even small errors such as the wrong address can affect your credit score and potentially cause problems when you apply for credit. 

How can I improve my credit score?

It is possible to optimise your credit score. The first thing to do is check your credit report with the three agencies and pinpoint what may be dragging your score down. You can see your score and request a copy of your full credit report at any time. Some services are free, but you’ll need to pay a small fee for others. If there are any mistakes or entries that need to be updated, you can dispute them. 

Here are a few simple ways to boost your credit score:

  • Make sure you’re on the electoral roll

    Lenders look for stability in borrowers. When you register to vote, you go on the electoral role. To get on it, you give details like your name, address, date of birth and your electoral number. It’s an easy way for lenders to confirm your identity and the accuracy of your details.

  • Be more reliable when it comes to paying bills

    Lenders loan money on the understanding that you’ll make regular repayments. Simply paying your bills on time, every time, will help boost your credit score long-term.

  • Consider getting a debt consolidation loan

    You may be able to apply for a debt consolidation loan to help manage all your existing debts with one monthly payment. You can check your eligibility without affecting your credit score further.

  • Consider getting a credit builder card

    Getting a credit-building credit card may also help you improve your credit score. These are credit cards with low credit limits and a higher than average interest rate. The sum you can borrow is therefore low but the interest you pay on what you borrow is high.

    First, check if you’re eligible for a credit builder card without affecting your credit rating. If you are and you successfully apply, use your card sensibly to build up your credit rating. Make sure you make the minimum monthly payments on time and stay within your credit limit. Not doing so could harm your credit rating further.