What Affects Your Credit Score in the UK?

Understanding what affects your credit score is vital for building credit. Read more to learn about the factors that impact your credit score in the UK.
A scale of credit scores from good to bad is displayed in front of a geometric background.

Your credit score is a reflection of how you use and manage credit. However, what’s not always clear to individuals who are new to building credit is what in particular impacts your credit score.

Understanding the factors that affect your credit score can help you prioritise and take proactive steps to build and protect your credit score. Ultimately, by managing your credit wisely, you’ll be eligible for better credit products and more favourable interest rates. Over the course of your life, this can save you thousands of pounds.

Here, we’ll take a look at some of the key factors influencing your credit.

What Are The Main Factors That Affect Your Credit Score?

If you want to improve your credit score, you’ll need to focus on the factors that impact it the most. While there’s a vast array of factors that affect your credit score, the following items are some of the most important:

Your Payment History

Your payment history has the largest impact on your credit score by far. Paying bills and making credit card payments on time and in full is one of the most important things you can do for your credit score.

Your Credit History

Not only do lenders and credit reference agencies want to see that you make timely payments, they want to know that you’ve been doing so consistently for years. If your credit history is only a few months old, your credit score will most likely be lower than someone who has had credit for years, even if they’ve missed a payment and you haven’t.

Your Credit Utilisation Ratio

Your credit utilisation ratio, which describes how much of the credit available to you is being used each month, also impacts your credit score. Ideally, your credit utilisation ratio across all credit lines should be 25% or less. This demonstrates to lenders and credit reference agencies that you can handle your monthly finances without depending on credit.

Your Credit Mix

Your credit mix is important because it demonstrates that you can handle different kinds of credit. If you have student loans, a car payment, and a credit card and you stay up to date on payments for each of them, it illustrates your ability to manage credit better than a single credit line would.

What Hurts Your Credit Score?

If you’re building your credit score, it’s also vital to avoid anything that will damage your score, but crucially things like:

Missed Payments

Just as making payment on time and in full is vital for building your credit, failing to do so can have massive consequences for your credit score. If you can’t pay a credit card in full in a given month, at least make the minimum monthly payment to avoid serious damage to your credit score.

Being Financially Linked to Someone

If you and an ex shared financials, phone contracts, or car loans, you could be impacted if they fail to make timely payments. To avoid having your credit damaged due to them, make sure that your ex is your financial ex too: contact the appropriate lender or agency to verify that contracts have been transferred out of your name.

Too Many Applications for New Credit

When you apply for a new line of credit, a lender will typically run a hard credit check. This will typically have a small impact on your credit score that will resolve in time. However, applying for too many new lines of credit can not only cause several small drops that add up, but it can also signal to lenders that you are dependent on credit, which can lower your score further.

Defaults and CCJs

County Court Judgements (CCJs) occur when you’ve failed to repay a debt and the lender has taken legal action against you to recover the debt.

A default occurs when you fail to repay a debt and a lender closes your account. They may be able to seize assets to cover the debt.

It’s unlikely that you’ll be served a CCJ or that your account will default after a month—it typically takes longer for lenders to pursue these severe actions—but they should be taken very seriously. CCJs and defaults can both stay on your credit report for six years, while having huge impacts on your credit score.

FAQs About Impacting Your Credit Score

As you learn about your credit score, you’ll find that it’s influenced by more than you might think. With that in mind, let’s take a look at some common questions about factors that can affect your credit score. 

Does Checking Your Credit Score Lower it in the UK?

Checking your credit score online through a credit reference agency doesn’t impact your credit score in any way. This is because when you check your own credit score, it is what’s referred to as a soft credit check.

Checking your credit score can actually be good for your credit score. If you find an error while checking your credit score, you can contact CRAs to dispute it and potentially have it removed from your credit report.

Do Student Loans Affect Your Credit Score?

Student loans in the UK don’t affect your credit score. The only way they will impact your credit score or creditworthiness is if you apply for a mortgage. In that case, lenders may assess your student loan debts when determining how much you’re eligible to borrow.

Do Overdrafts Affect Your Credit Score?

Overdrafts can affect your credit score. Keep in mind that your overdraft is a form of credit. Using an arranged overdraft can benefit your credit score like any other types of credit would so long as you repay it promptly and in full. However, regularly overdrawing your account can indicate to lenders that you’re struggling to manage your monthly finances, and damage your credit score.

New to Building Credit? Pave Can Help

Building credit can be hard, especially if you’re just getting started. The good news is that you don’t have to do it alone—Pave is here to help. With bills monitoring, active credit building, and personalised credit fixes, our app can help you stay on top of monthly payments, flag areas for improvement, and build your payment history,

Get started building your credit score in three minutes—download Pave from the App Store or Google Play today.