What Is a Bad Credit Score?

What is a credit score?

A credit score is a number. It sums up your financial history and how well you have used money in the past.

In the UK, credit reference agencies work out your score. There are three main ones:

• Experian — 0 to 1,250
• Equifax — 0 to 1,000
• TransUnion — 0 to 710

Each one uses its own scale. So your score will look different with each one.

What is a bad credit score?

A bad credit score sits near the bottom of each scale. The exact numbers can change, but here is a rough guide to credit score ranges:

Experian (0–1,250)

• Poor: 0–561
• Fair: 562–720
• Good: 721–960
• Great: 961–1,250

Equifax (0–1,000)

• Poor: 0–438
• Fair: 439–530
• Good: 531–670
• Great: 671–1,000

TransUnion (0–710)

• Very Poor: 0–550
• Poor: 551–565
• Fair: 566–603
• Good: 604–627
• Great: 628–710

Your score is based on things like:

• How you manage credit
• How much debt you have right now
• How long you have had credit

Your credit score matters when you want to borrow money. Lenders look at it to decide if they will lend to you. A low score tells them there is more risk. They may think you are less likely to repay money.

If you do get a loan with a bad score, the interest rate is likely to be higher. That means you pay more each month. And you pay more overall.

It is not just loans. Landlords may check your score when you want to rent a home. Some employers may look at it when you apply for a job. A bad credit score can make many parts of life harder.

What causes a bad credit score?

Many factors can lead to a low credit score. Here are some of the most common.

Missed payments and late payments

How you pay is the biggest factor. Even one missed payment can cause a drop. Late payments stay on your credit report for six years. Making payments on time is one of the best things you can do.

County Court Judgements (CCJs)

A CCJ is a court order that says you owe money. If you do not pay the amount in full within a month of it being issued, the CCJ will stay on your credit record for six years.

Bankruptcy

If you have been declared bankrupt, it will show for six years. It is one of the most serious marks on your credit file. Even after it goes away, some lenders may still ask about it.

Too many credit applications

Each time you apply for credit, the lender does a hard search. Too many of these in a short period can lower your score. It can make it look like you are in financial difficulties.

High credit use

If you use most of your credit limit, it can hurt your score. Say you have a credit limit of £2,000 and use £1,800. That is 90% of your limit. Lenders like to see you use less than 30%.

No credit history

This may sound odd. But if you have no borrowing history, lenders cannot assess you. A thin file can be as much of an issue as a poor one.

Not on the electoral roll

The electoral roll helps prove who you are and where you live. If you are not on it, your score may be lower. You can sign up to register for free.

Errors on your credit report

Mistakes on your credit file can hurt your score. Even a small error like the wrong address could mean a loan is turned down. Make sure all your details are right. Check that what your lenders have said about you is correct too. If you spot a mistake, get it fixed as soon as you can.

How can I check my credit score?

There are a few easy ways to check your score.

1. Go to the credit reference agencies

In the UK, there are three credit reference agencies. They are Experian, Equifax and TransUnion. You can get your score from each one for free.

Lenders use data from these agencies when they decide on your loan. So it pays to check your file. Make sure what is on there is correct.

2. Use a free credit checking service

Some services show you your score for free. You just need to sign up. They check your details with the agencies and show your score. Two popular ones are Clearscore and Credit Karma.

You can also get alerts when something on your file changes. That way, you do not need to keep checking it yourself.

How a bad credit score can affect you

A bad score can touch many parts of your day-to-day life.

Borrowing money

With bad credit, it is harder to get a loan or credit card. If you are accepted, you may pay higher interest rates. Over time, you pay back much more.

Renting

Many landlords check your credit. A bad credit rating may make it harder to rent. You may need a bigger deposit or a guarantor.

Phone contracts

A phone contract is a type of credit. If your score is low, you may be turned down. You may need to go with a pay-as-you-go plan.

A current account

Some banks check your credit when you open an account. Basic accounts are open to most. But premium ones may not be if your score is poor.

Insurance costs

Some insurers look at your credit as one of the factors. A poor score may mean you pay more for car or home cover.

Can I get a credit card with a bad credit score?

Yes, you may still be able to get one. You are less likely to be accepted by big high street banks. But some lenders do offer cards for people with poor credit.

These cards often have a lower credit limit and higher interest rates. So try to pay off your balance in full each month if you can.

The best way to find out if you can get a credit card is by checking if you’re eligible to apply with the lender.

How to improve your credit score

You can take steps to take your score from bad to good. It takes time, but it is worth it.

1. Check your credit report

Look at your report from all three agencies. Check for errors. Get them fixed. This alone can help.

2. Get on the electoral roll

If you are not on it, sign up now. It is one of the fastest ways to boost your score. It helps lenders check your identity.

3. Pay on time, every time

Set up direct debits for all your bills. Making regular payments on time shows you can manage your finances. Even a phone bill or a streaming service counts.

4. Keep credit use low

Try to use less than 30% of your credit limit. If your limit is £1,000, keep your balance under £300.

5. Space out new applications

Do not apply for lots of credit in a short period. Each hard search can lower your score. Use checks that do a soft search first.

6. Pay down debt

If you have debt, work on paying it down. Start with the debt that has the highest interest rates. Making payments and cutting what you owe helps your score over a long period.

7. Build a borrowing history

If you have no credit history, a credit builder card can help. Use it for small buys. Pay it off in full each month. This builds a track record over time. If you have no credit history, tools like credit builder cards may help. Paying off anything you borrow on a card in full each month is generally considered sensible. It shows on your credit file and can help build a track record over time.

8. Check for fraud

Look for accounts or searches you don’t know. Fraud can hurt your score. If you spot something odd, tell the credit reference agency and Action Fraud.

9. Be patient

Building a good credit score doesn’t happen overnight. Bad marks like missed payments, CCJs, and bankruptcy stay for six years. But they fade over time. The key is to build good habits now. Each month of good credit use helps your future.

When to Get Help

If you are in financial difficulties, get advice early. There are free services that can help you manage debt and plan ahead:

• MoneyHelper - free help with money, debt, and pensions
• StepChange - free debt advice and plans
• Citizens Advice - free help with debt, benefits, and legal issues
• National Debtline - free phone and online debt advice

Conclusion

Your credit score matters more than you might think. It plays a big role when you want to borrow money.

But if your score is low right now, do not worry. It is not fixed for life. It can change based on how you manage your money from here on. Small steps can make a big difference over time.

You can find tips on how to improve your credit score.