What is an Average Credit Score and How Does This Affect Things in the UK?

As the new year kicks off, you may be taking some time out to look at your finances, budget for a holiday later in the year, or you may even be thinking about buying a new home. If your plans involve taking out a loan of any kind, you may have come across the topic of your credit score – and this could have an impact if yours is less than attractive right now. The good news is that you can increase it to get the benefits you really want, but for now, let’s take a look at the average credit score in the UK.

When you find yourself asking “what is the average credit score in the UK?” it can be important to understand that it is calculated using a points system and the number generated won’t be the same for all areas of the UK. It will also depend on the credit reference agency that banks and financial institutions run their checks on. There are 3 major ones, Experian, Equifax and TransUnion, so here are the average scores for each:

• Experian: 759
• Equifax: 383
• TransUnion: 610

As you can see, these are quite different, so it may be better to consider what low, good and excellent credit scores are. Overall, a low score is typically rated between 561 and 720, good between 881 and 960 and excellent between 961 and 999. As potential lenders won’t tell you which credit reference agency they’re going to use to determine your creditworthiness, it can be a good idea to ensure that you have a score on the higher side to get the maximum benefits.

How are credit scores calculated in the UK?

Credit scores in the UK are typically calculated using several factors, including:

• The number of open accounts you have
• Your total level of debt
• Any credit card account information
• Your current balances
• Your available credit
• Any pre-arranged overdrafts or how often you go overdrawn
• Larger or ongoing finance contracts
• Your payment history

The good news is that properly managing these factors and ensuring that you pay everything on time will increase your score over time, as long as you are consistent.

Why is a credit score an important consideration?

When you want to borrow money, whether it is for something as large as a mortgage or as little as a mobile phone contract, lenders will use your credit score to determine whether you will be likely to keep up the repayments. If they decide that you are trustworthy, the level of your credit score can affect how much they choose to lend you, the interest you will pay and potentially even the duration of the loan.

The benefits of a higher credit score

The better your credit score, the more lending opportunities you will have – and you may have the ability to negotiate rates and terms that will best suit your needs. Aside from the obvious benefits of lesser interest rates, you may be awarded a higher credit limit for credit cards, better terms for homeowners insurance and car insurance plans, faster approval for loans and even by landlords when looking to rent a new property and the ability to get utility and phone contracts without putting down a deposit.