What is a credit score?

Getting your head around the world of money can be tough. But, once you’ve got the fundamentals down, everything gets that bit easier. In this blog, ClearScore gives you a deeper dive on how credit reference agencies work out your credit score. 


Interested in finding out more? Sign up for one of The Money Charity's free and interactive virtual workshops by emailing fintechpledge@themoneycharity.org.uk for a deeper dive on managing your personal finance. 


Your credit score is a number that represents your credit history – it gives you an idea of how lenders see your past relationship with credit. The higher your score, the more strongly lenders feel you’ll repay the money they lend you. 

Credit reference agencies use your credit history to work out your credit score. There are three in the UK – Experian, Equifax and TransUnion. You also then have providers like us at ClearScore, we are not a credit reference agency but allow users to view their credit score and report for free using data from Equifax. Other tools that can give you an idea of your credit score include Zopa’s Borrowing Power and you can also get a free score from Experian


How is my credit score worked out? 

To work out your credit score, credit reference agencies mainly look at these five things. 

  1. Payment history: A lender’s top priority is to make sure you repay your debt on time. The best way for them to predict this is by looking at how you’ve handled credit in the past. You should look to build a good payment history by consistently making repayments on time. That’s why taking out credit can be a good thing, as it lets you build up your payment history and show that you can be trusted to repay credit. It’s a common misconception that having no credit cards or loans will protect your credit score. This is not the case and doesn’t show a lender that they can trust you to repay credit. 

  2. Used credit vs available credit: Lenders also look at how much of your available credit you’re using. This is often expressed as a percentage of your credit limit. For example, imagine you have a credit card with a limit of £500 and your balance is £250 and you’re only using 50% of your available credit. This makes you look more trustworthy to lenders. 

  3. Length of your credit history: The longer you’ve been using credit, the more information a lender has to decide how creditworthy you are. So, if you’ve had a credit account for a while, you might see your credit score rise, especially if you’ve made all of your payments in full and on time. 

  4. Hard credit searches: Applying for new credit or to increase your credit limit usually effect negatively affects your credit score, but there are some exceptions. If you’re using comparison sites to shop for types of credit, only one search will show up on your credit score, as long as you compare products from different lenders within a 45-day period. A hard credit search will affect your score even if you decide not to go ahead with the card or loan. Your score will drop by five points or less, and this information will stay on your report for up to 24 months. The following things use soft credit searches, which don’t affect your credit score at all. 


  • Personal credit checks 

  • Pre-approved credit offers 

  • Insurance applications 

  • Checking your credit offers 

  • Account reviews by current creditors 

  • Employment applications 


  1. Types of credit you use: Using a range of credit types, such as revolving credit (credit cards) and instalment loans (mortgages and personal loans), can increase your credit score. Lenders like to see that you can handle several forms of credit at once. 


How do lenders decide to give you credit? 

When you apply for credit, the lender has to decide if you’re a safe bet. And your credit score isn’t the only thing they look at – they also consider your income and spending. 

A lender can look at your score and report from one or all agencies to gather enough information to make their decision. 

Keep in mind, each lender is unique. Even when reviewing identical information, they may reach different conclusions when deciding whether to approve you for credit. 

That’s everything for now. Keep an eye on the blog as we’ll be posting more articles to help you master your money.  

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