What affects your credit score in the UK? These key factors

If you’re new to building credit, you might be unsure what’s myth and what’s fact, what impacts your credit score and what doesn’t. We feel you. There’s a lot of conflicting information out there. That’s why the Pave team put together this resource explaining five essential factors that affect your credit score in the UK.

Let’s get right to it.

Five factors that affect your credit score

Want to know what affects your credit score? We’ve got you covered. However, it’s also useful to understand why these factors influence your credit score.

A helpful tactic for understanding why these factors matter is to consider things from the perspective of a lender. A lender’s main goal is to get their money back, usually with a bit of interest on top. Therefore, everything they look at will be assessed with that in mind.

• Amounts owed (debts): If you have a lot of debt or outstanding payments, it can hurt your credit score. To a lender, high amounts owed or debts indicate that if your income is disrupted or you’re forced to spend a lot on an emergency, you could miss a payment to a lender or bank. One way your amounts owed can build up quickly is if you’re only making the minimum payment on your credit cards. If you do this, your amount owed — and the amount of interest you need to pay — can add up quickly.
  
  Want to learn more about the credit card minimum payment trap? Check out our resource dedicated to the topic.
  
  
• Credit history length: The longer your credit history is, the better. If you were a lender, who would you rather lend to, someone who’s shown their ability to make payments for five years, or someone who’s shown their ability to make payments for a month? The more historical evidence you have to back your financial habits up, the better.
  
  
• Credit mix: Demonstrating your ability to handle different kinds of credit will strengthen your score. Again, to consider the lender’s perspective, knowing that someone can handle a credit card and a personal loan, and car finance responsibly inspires confidence compared to someone with just one credit card.
  
  
• New credit: Finally, the amount of new credit you have can impact your credit score as well. If you have a lot of new credit, a lender might think that you’re in desperate times. Applying for or opening too many new accounts in a short period can hurt your credit score.
  
  

What impacts your credit score the most?

Your payment history is far and away the most important factor influencing your credit score. After all, it’s the most important thing for lenders to know: how reliably do you make your payments?

Making payments on time and in full can give your credit score a significant boost. At the same time, even a single missed or late payment can damage your credit score and remain visible on your credit report for six years.

Having trouble tracking payments? Pave can help.

What damages your credit score?

Now you know what impacts your credit score. But what hurts it? Missed payments can hurt your score significantly, but the opposites of the above factors aren’t necessarily marks against your credit score.

For example, a brief credit history won’t help your credit score, but it’s unlikely to hurt your credit score either (unless it’s filled with markers like late and missed payments). Alternatively, if you’ve just opened your first credit card account, your credit mix won’t be great, but this is unlikely to hurt your credit score. It’s simply not something that’s going to boost your score.

The factors that damage your credit score typically have to do with how you use your credit, as well as how confident lenders can be in verifying your identity. Some factors that can damage your credit score include:

• Applying for credit too often: As we mentioned earlier, applying for credit too frequently can signal that you’re in desperate need of it. More importantly, each time you apply for credit, the lender or bank will run a hard credit check, which temporarily damages your credit score. If you’re only applying for one account, that impact is typically minor. However, if you’re repeatedly applying for credit, those dings to your credit will add up to something significant.
• Using too much of your available credit: While your credit card or overdraft might come with a £1,500 credit limit, that doesn’t mean you should spend all of it. In fact, using all of your credit limit can indicate that you’re dependent on credit, which lenders don’t like to see. To give your credit score the best foundation to grow on, try to avoid using more than 25% of your available credit before paying it off.
• Not being on the electoral roll: Being registered on the electoral roll at your current address helps lenders confirm that you are who you say you are. Not being registered may not directly affect your credit score, but it will affect how much access to credit you have and will delay enrollment needlessly.

Do buy now, pay later arrangements affect your credit score?

The short answer: sometimes. For the long answer, check out our article on whether Klarna affects your credit score.

Don’t worry; the following things won’t affect your credit score

There are a lot of misconceptions about what can and can’t affect your credit score. Here are a few things that you don’t need to worry about impacting your score:

• Checking your credit score: When you check your own credit score, you’re running a soft credit check, and only hard credit checks performed by lenders are recorded in your credit report. You can check your credit as frequently as you’d like — in fact, checking it frequently is a good idea, as you can catch mistakes, errors, and fraudulent activity.
  
  Want to keep a better eye on your score? Join Pave to track your TransUnion score, or upgrade to Pave Plus for the only credit building app that allows you to view your TransUnion and Equifax score in one convenient place! 

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• Your income: How much you earn doesn’t impact your credit score. What your income can impact is your eligibility for certain products. For example if you apply for products you’re not eligible for based on income, you could hurt your credit score through the hard check associated with your application. However, your income alone will not — repeat, will not — impact your credit score.
  
  
• Being denied credit: Similar to your income, being denied credit doesn’t hurt your score. When you apply for credit, all that’s recorded in your credit report is that a hard check was pulled. Information on whether your application was approved or denied is never added to your report. Keep in mind that hard credit pulls do impact your credit, and repeatedly applying for credit can damage your score, regardless of whether you’re denied or not.
  
  

To build your credit score, start by understanding what affects it

Building your credit score doesn’t need to be hard. However, for many people in the UK, it’s difficult because they don’t understand exactly what impacts it. Understanding what affects your credit score gives you a foundation to start making better credit decisions.

Making timely payments, using 25% or less of your available credit, and keeping your old accounts open are all relatively small things that can have a huge impact on your credit score. Focusing your efforts on those core actions should pay off over time — giving you access to credit products with better terms, more favourable interest rates, and higher credit limits.

Protect your credit with the Pave app

If you’re getting started building your credit or are rebuilding it, it’s always beneficial to have someone on your team. That’s why we made the Pave app.

Pave helps you build your credit by reporting your payment behaviour to the UK’s three major credit bureaus, including TransUnion, Equifax, and Experian. Plus, by monitoring your bank account with Pave’s Bills Alerts, you can get alerts on bills that could impact your credit score. Finally, we make it easy for you to track your progress. Pave is the only app in the UK that allows you to track your TransUnion and Equifax scores in one place.

Want to see why hundreds of thousands of people have turned to Pave to start building their credit? Check out our 1,500+ reviews on Trustpilot, or download the app today!

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*Pave cannot guarantee an increase in your credit score. Some features are subject to approval.