What is a good credit score?

A good credit score opens doors financially, while a poor one can lock you out of opportunities. Find out what qualifies as a good credit score and learn about credit score ranges and how lenders use them to decide if you’re a trustworthy borrower.

Understanding credit scores

Your credit score is a three digit number that represents your credit profile and  scores your trustworthiness when it comes to borrowing money. Lenders use your score to assess financial risk, and decide whether they’ll approve a loan or credit card. Your score is based on things like whether you pay bills on time, how much of your credit you're using, and how long you've had credit. The better your score, the easier it is to get approved for credit and get lower interest rates.

In the UK, there are three main credit reference agencies in the UK that you can use: Experian, Equifax, and TransUnion. Each uses a different scale and methodology to calculate your score, so it may vary between them, but typically, the scale gives a credit score range of 0-999.

What is considered a good credit score?

Though the actual numbers can vary from agency to agency, credit score ranges are generally defined as follows:

• Poor: In this category, you’d generally be seen as a high-risk borrower. This might mean that lenders might deny a credit application, or attach high interest rates, to offset their lending risk.
• Fair: If you fall into this grouping, you’re seen as carrying some risk. You might attract higher interest rates or less favourable borrowing terms.
• Good: A good credit rating shows a solid credit history. Lenders trust you more, so you’ll usually receive better terms and lower interest rates, having demonstrated responsible finance management.
• Excellent: Congratulations! This is the highest scoring group and lenders will give you the best offers. In this range, you’ll typically have a long history of timely payments, a low ratio of credit utilisation, and a good mixture of credit.

How a good credit score can benefit you

Having a good credit score means you’re more likely to get lower interest rates, better loan options, higher credit limits, and even potential discounts on insurance. On the flip side, a low credit rating can limit your borrowing options, hike up interest rates, and even lead to loan applications being denied.

What impacts your credit score?

Your credit score is impacted by several key factors. Understanding them can help you keep your score healthy.

• Payment History: This is the most important factor. Paying bills on time and in full will give you a higher score.
• Credit Utilisation: Try to keep this under 30%.
• Length of Credit History: A longer history is generally better, but it takes time to build.
• Types of Credit: A mix of credit (credit cards, loans, even direct debit payments) positively impacts your score.
• New Credit: Too many credit applications at once can lower your score temporarily.

Want more info on these factors? We’ve got you covered.

How to achieve and maintain a good credit score

Achieving a good credit score takes time, but you’ll begin to see improvements in just a few months. Here’s how:

• Make timely payments: Your payment history has the biggest impact on your overall score, and it’s where you’ll see the fastest results if you’re consistent.
• Keep your balance low: Aim to keep your balance at a maximum of 30%. You can also pay down your balances faster or consider spreading your spending across multiple credit cards to keep your balances in check.
• Avoid “hard” enquiries: “Hard” enquiries will put a temporary dent in your score, so only apply for new credit when necessary.
• Build a credit history: Start small and make payments on time and in full to help establish a good credit history.
• Check your credit report: Review your reports annually and dispute any inconsistencies. Even small corrections can boost your score.

If you’ve never had credit before, it can take 3-6 months to get your first score. After that, you’ll see gradual improvements and it can take between 1 and 3 years to see your score hit the “good” range. 

If you’re bouncing back from a rough patch (late payments, debt collection, or a bankruptcy), good habits will go a long way. Stay on top of your bills, build a good history with timely payments and low balances, and you’ll see your score recover. As always with credit, consistency is key!