What is a credit score?

Your credit score can give lenders a snapshot of how you manage credit, like credit cards, loans, and mortgages.

It’s generated for you by UK credit reference agencies.

It’s based on information held about you on public records and supplied by credit and service providers.

Your credit score is then shown as a number.

Simply put, the higher your score, the more likely you are to be approved for credit, as it reflects how likely you are to repay any borrowing.

Your credit score isn’t fixed and can change as your financial situation does.

In the UK, there are three main credit reference agencies –TransUnion, Experian and Equifax.

They may each hold different information about you and have different ways of working out a credit score for you.

Individual lenders and service providers might use their own scoring systems too, which may include looking at information from your credit record.

They may also take into account what you can afford and how you have paid previous credit accounts.

What is a credit score used for?

For example, when you apply for a Black Horse FlexPay account, credit card or personal loan, your credit record might be checked - or searched – by us or whoever you’re applying with.

They’ll use their preferred credit reference agencies to do this, which will show them the potential risk of offering you credit.

Your credit record might also be used by lenders or service providers along with other relevant data to decide what interest rate, loan amount, or credit limit to offer you.

Do lenders check anything else? 

Most lenders check the following:

Your details - This usually includes your address, employment status, income and regular expenses.
Affordability - Whether you can repay a new facility on top of your current outgoings.
Account history - Were previous accounts held by you managed well?

How to check your credit score and report

Checking your score and what information’s held about you before you apply for credit is always sensible.

Get a copy of your file from the three UK credit reference agencies below to get a full picture, and if you notice anything reporting incorrectly, you can raise a dispute to the relevant agency. They’ll then investigate it and update their records.

The credit agencies Black Horse FlexPay use are:
TransUnion - https://www.transunion.co.uk/
Experian - https://www.experian.co.uk/
Equifax - https://www.equifax.co.uk/

How is your credit score calculated?

Credit reference agencies use information from many sources.

These include:
The electoral register - Sometimes known as the electoral roll or voters roll, being registered on this helps confirm your identity and home address and is one way to help to improve your credit score.

Court records - Adverse information like defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcies can impact your credit score for up to six years.

Lenders and service providers - How well you manage or have managed accounts, and how much credit you’ve used or can use, can impact your credit score.

You might think this just means things like mortgages, credit cards, and loans, but store cards, mobile phone contracts, TV subscriptions, and other household bills might also be included.

Improving your credit score

It might take a while, but these are some of the things you can do that might improve your credit score.

Register to vote - Being on the electoral roll - sometimes known as the voters' roll - is a good way to confirm your identity and home address, which could improve your credit score.

Don’t move around - Having the same address for a long time could also show stability.

Manage your spending - Having a lot of debt close to its credit limit on a regular basis could suggest you rely on credit.

Mix it up - Having various types of credit, like loans, credit cards, and a mortgage, shows you can manage different borrowing. Not using credit at all, on the other hand, could keep your credit score low, even if your income’s high.

Long-term is best - Having active credit accounts that have been open for a long time could help your credit score.

Manage accounts properly - Things like arrears, missed, late or defaulted payments, and going over agreed credit limits could show on your credit report and might bring you score down.

Figure out what matters - As well as mortgage, credit card, loan, FlexPay, car finance, and overdraft repayments, how you manage store cards, mobile phone contracts, TV subscriptions, and other household bills might influence your credit score too.

Make sure everything’s as it should be - If you notice anything reporting incorrectly about you with the credit reference agencies, you could submit a data dispute to the relevant agency. They’ll then investigate it and update their records.

Reduce existing balances - Keeping your existing debit balances to a minimum is a good idea, as lenders are less likely to offer you new credit if they feel you’re overstretched.

Your account counts - Always have enough in your bank account to cover payments, as this could boost your credit score. Direct Debits for regular payments can help with this.

Don’t apply too many times

Too many full applications in a short time period might affect your credit score - regardless of whether you’re accepted or not.

Look for ‘soft’ credit checks offered by some lenders instead, as you can check your eligibility without jeopardising your credit score.

Joint accounts - Any bank accounts, mortgages or utility bills you have with someone else could create a financial link between you. So, if they don’t have a good credit score, it could impact your credit. To remove any associations with people you’re no longer linked to, you’ll need to submit a notice of disassociation with each credit reference agency.