What is a credit score and how does it work?

A credit score is a number that sums up how you have managed borrowing in the past. Citizens Advice describes it plainly: "Credit scoring is a system used by creditors to decide how much of a risk it is to lend to you"¹. The score itself is usually a three digit number with a word grading attached, such as "good" or "excellent", and one common scale runs from 0 to 1,000². It is worked out from your credit report, which is a record of the credit you have taken out, how much you owe, how you handle the payments, and whether any court action has been taken against you⁴.

There is no single score that every lender sees. Each credit reference agency produces its own score from its own version of your file, and each lender then applies its own scoring system on top. So the number you see on an app or a free checking service is a guide to how your file looks, not the number a lender will actually use when you apply for a credit card, a loan or a mortgage.

This page explains where the score comes from, what lenders do with it, how your borrowing history shapes it, what to do if you are declined, and how to see and improve what lenders see.

A credit score is a points system based on your credit report

The score is built from your credit file, which is a record of any credit you take out, including how much you owe, how you handle payments, and whether any court action is taken against you⁴. The file is not a snapshot of one product. It tracks how you use loans, credit cards, bank accounts, mobile phone contracts, car insurance paid in monthly instalments, and accounts with some utility companies⁸.

The information gets there because creditors supply it. Credit reference agencies obtain information from creditors, including banks and building societies, government departments, local authorities and utility companies, and use it to create your credit file showing your recent credit history and credit commitments⁹. When you make a payment on time, or miss one, the creditor reports it, and the record builds up over time.

The score itself is the agency's summary of that file. Advice NI notes that each credit score, regardless of the credit referencing agency, will be a three digit number accompanied by a word², and StepChange gives the scale it uses as a number from 0 to 1,000³. A higher score suggests a cleaner history of repaying what you borrowed; a lower score suggests problems, such as missed payments, defaults or court judgments.

A credit reference report can also help you, not just lenders: Shelter Cymru points out that it can help you keep track of your finances¹⁰. Because it lists the accounts you hold and how they are being paid, it is one of the few places you can see all your credit commitments in one place, and spot accounts you may have forgotten about or ones you did not open at all.

What lenders use your score for

Whenever you apply to borrow, the lender checks your record first. With a credit card, the provider will check your credit record with a credit reference agency to see if you are credit worthy¹². The same happens with other forms of credit: the creditor will check your credit report and use the information on it to decide whether to lend to you¹³.

The score feeds a decision with three possible outcomes. Creditors set a threshold level for credit scoring. If your score is below the threshold they may decide not to lend to you, or to charge you more if they do agree to lend¹. That second outcome matters as much as the first: a weaker score does not always close the door, but it can make borrowing more expensive.

Credit checks reach further than cards and loans:

• Current accounts: banks often check your credit rating when you open a current account and can refuse an application based on credit history¹⁴.
• Mortgages: lenders run a credit check on each applicant before granting a mortgage, and if one party to a joint application has a poor credit score, it could affect the lender's decision¹⁵.
• Renting: credit checks show information about money you have borrowed and any problems paying it back, and landlords and letting agents use them when assessing tenants¹⁶.

A credit score is not the whole of the decision, though. Lenders also run affordability checks, which look at your income and outgoings to judge whether you can afford the repayments, and they check your credit file for details of your debts as part of that¹⁸. A clean credit history does not guarantee acceptance if the lender judges the repayments unaffordable, and a lender that lends without checking affordability properly may be acting irresponsibly¹⁸.

How your borrowing history shapes your score

What lifts or lowers your score is, above all, your payment record. The Bank of England puts it simply: failing to pay debts, whether secured or unsecured, can affect your credit rating¹⁹. Problems are recorded on your file and stay there for years.

The main entries that shape a file include:

• Missed and late payments: late payments stay on your credit history for six years, as do missed payments and defaults²⁰. A missed mortgage repayment leaves a mark on your credit report that remains for six years²¹.
• Defaults: after missed payments, your credit file will show that you did not make your agreed payments, which impacts your credit score²².
• County court judgments: a CCJ will appear on your credit report, and it is that information a credit reference agency provides to companies²³.
• Everyday bills: if you do not pay a bill on time, this could affect your credit rating and will appear on your credit file²⁴.

The range of products covered is wider than many people expect. Miss a payment on a payday loan and it will be recorded on your credit reference file²⁵. Miss payments on a buy now pay later agreement and they will show on your credit score and can make it harder to get credit in future²⁶. Among BNPL providers themselves the treatment differs: a news comparison found Laybuy reports missed repayments, OpenPay did not, and Zilch says it may provide details of late payments to credit reference agencies²⁷.

Joint and shared debts carry a particular risk. If a payment is missed on a debt shared with an ex-partner, it is recorded on your credit file as well as your ex-partner's, even if the ex-partner agreed to repay the debt²⁸. A debt consolidation loan works the same way as any other credit: if the cost of the new loan is hard to manage and you miss payments, this will show on your credit file and affect your score²⁹.

Stopping payments without the lender's agreement is treated as a missed payment even when it feels like a temporary pause. The provider and credit reference agencies count it as a missed payment, recorded on your credit file, and several missed payments put the account at risk of defaulting³⁰. If you are struggling, asking the creditor before missing a payment, rather than after, changes what appears on your file.

Credit score or credit rating: the same idea

The two terms are used interchangeably, and the difference is one of wording rather than substance. Citizens Advice describes the level of risk a lender sees as your credit rating⁵, while the number produced from your file is called your credit score. Both describe the same underlying thing: how your record of borrowing looks to a lender.

Because the idea is the same, so is the practical advice around it. You can check your credit score for free with credit reference agencies, though it is worth checking whether you have to pay before using one³¹. Debt Advice Foundation makes a further point that applies whichever word you use: each agency works in a slightly different way, and every lender looks at different things, so it is worth trying to check all three if possible³².

The score you see is a summary, and the rating a lender forms is its own judgement of the same material. When a lender looks at your file, it is not reading the number from an app; it is reading the file itself and applying its own system. That is why the same person can be rated differently by different lenders on the same day.

What a credit score does not tell a lender

A credit score is a summary of one thing: your history of managing credit. It does not tell a lender everything, and it is worth knowing where it stops.

• There is no universal score. There's no such thing as a universal credit score; each lender has its own system¹¹. The number you see is one agency's view, not an industry-wide mark.
• Lenders will not show you their score. They won't tell you what your score is, but if you ask them, they must tell you which credit reference agency they used to get the information about you¹.
• Your balances are not the whole story. Credit reports don't include information about your balance, but they do show lenders how many accounts you have open³³.
• Some checks leave no trace. A credit check by a landlord or letting agent does not affect your credit score¹⁷.
• Some lending ignores it entirely. Your credit score is not looked at for loans from your local authority, which are called welfare assistance³⁴.

Some lenders deliberately look beyond the score altogether. Responsible finance providers describe their approach as looking beyond a credit score or standard lending criteria to understand the person, business or organisation behind an application³⁵. For someone with a thin file or a damaged one, that kind of lender may weigh circumstances the score does not capture.

The score also says nothing about your income, savings or spending, which is why affordability checks exist alongside it¹⁸. Two people with identical scores can get different answers from the same lender if their incomes and outgoings differ.

If you are declined for credit

Being declined is common, and what you do next matters, because applications themselves leave traces. Any failed application reduces your credit rating, in what StepChange calls the "rejection spiral"³⁶. If you apply for a credit card and are rejected, it will be noted on your credit file and could impact your credit score³⁷. A rejected mortgage application is recorded on your credit file too³⁸. The practical rule that follows: do not apply for a lot of credit cards in a short space of time, because a run of rejections in a short period can itself hurt your score³⁶.

You have rights after a refusal. If a lender refuses you credit after checking your credit reference file, they must tell you why credit has been refused and give you the details of the credit reference agency they used¹. This duty is set in rules too: if an application for credit is declined on the basis of information from a credit reference agency, the creditor must tell the consumer and provide contact details for the agency³⁹. There is also a review right for automated decisions: if a lender refuses you credit because it worked out your credit score just by using a computer, you can ask it to review the decision by an employee of the lender⁴⁰. Business Debtline adds that the finance company should give you good reasons why they turned you down, including whether they used a credit-scoring system⁴¹.

A refusal is not always the end of the market. With a bad credit history, some high-street banks may refuse to give you a mortgage outright, while building societies and specialist lenders can be more flexible⁶. The Bank of England's summary is the honest one: having a bad credit rating will make it more expensive and harder to borrow money¹⁹.

How to see and improve what lenders see

Start by looking at what lenders see. You can check your credit score for free with credit reference agencies³¹, and you can check it as often as you like without doing any harm⁴². Checking your own score never lowers it; what can reduce your score is a lot of checks by lenders in a short amount of time⁴³, because multiple hard searches, particularly within a short period, can lower your credit score¹¹. The difference between the two kinds of search is covered in hard and soft credit searches.

StepChange sets out the main ways to improve what lenders see³⁶:

1. Pay back any credit you have borrowed.
2. Register on the electoral roll.
3. Check your credit report to make sure it is correct.
4. Make sure your credit file is not linked to somebody with a poor credit score.

The third of those matters more than people expect, because files do contain mistakes. Check your file through Experian, Credit Karma or Equifax⁴⁴. If anything on your credit file is incorrect, you can ask the credit reference agency to add a Notice of Correction, which allows you to provide an explanation for any errors or inaccurate information that lenders will then see⁹. How to correct wrong information, and what to do if an agency refuses, is covered in correcting your credit report and Notice of Correction.

Improvement is slow rather than instant, because the file records history, and history takes time to age out. Missed payments, defaults and court judgments stay on your file for six years³, so a damaged score recovers partly through time and partly through a clean run of payments on whatever credit you still hold. The pages on how to improve your credit score and building a credit history cover the detail.

Free help if your credit problems come from debt

If the entries on your file come from debts you cannot keep up with, free debt advice is the place to start, and it does not cost anything. StepChange, National Debtline and Citizens Advice all publish free guidance on credit files, missed payments and dealing with creditors⁴, and Business Debtline covers non-priority debts for people who are self-employed⁴¹. Debt Advice Foundation offers a free credit score checker alongside its debt tools³².

Getting debt advice early changes what ends up on your file. Creditors can be approached before payments are missed, and arrangements agreed with a creditor in time can avoid the missed payment records that follow an unmanaged default²². The debt section of this site sets out the options, from informal arrangements to formal solutions, and what each does to your credit file.

A poor credit history also narrows some doors more than others. Renting with a poor credit history is possible but takes more preparation³¹, and the pages on renting with a poor credit history and rebuilding credit after debt problems cover what to expect. Whatever the cause of the problem, the starting point is the same: see the file, check it is right, and get free advice before the next missed payment rather than after it.