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What is a credit score?

Your credit score, or credit rating, is a three-digit number calculated from the information a credit reference agency (CRA) holds about you. Your credit score indicates how you’ve handled credit in the past.

  • This guide looks at how TransUnion calculates your credit score

  • TransUnion provides TotallyMoney with the data used to create your credit report

  • What makes up your credit score with Experian and Equifax (the other two CRAs) will be different. This is because some lenders don’t report to all three CRAs, and each CRA calculates your score in a different way, using a different maximum score.

Why should I check my credit score?

Checking your credit score gives you knowledge. Once you’re armed with information about your credit score, you can understand what lenders see when they check your credit report, and why they make certain decisions about credit applications.

Checking your credit score can also help you identify any incorrect information that might be holding you back.

A better credit score will unlock access to more credit and better offers at more competitive rates.

What goes into your TotallyMoney credit score?

Payment behaviour

payment behaviour explains 48% of your credit score – it’s the largest contributing factor.

Your payment behaviour includes:

  • on-time payments

  • late payments

  • missed payments

  • how recently you missed payments or paid late

This is checked across all your credit accounts. Missing payments will damage your credit score, so never miss a payment and always pay on time.

Credit usage

Credit usage accounts for 21% of your credit score.

Your credit usage looks at all your credit accounts — including credit cards, overdrafts, mortgages, and loans – and considers:

  • the amount of credit available to you

  • how close you are to your limits

You should always try and use less than 25% of your total credit limit across each of your credit accounts.

Carrying a balance of more than a quarter of your total available credit could cause your credit score to drop.

Once you reach 50% of your total credit limit, your credit score can fall a lot. It suggests you’re struggling to manage the credit you have, and makes lenders cautious about letting you borrow more.

Never use close to 100% of your available credit. If you’re getting close to your credit limit, consider asking for your credit limit to be increased.

Credit experience

Credit experience accounts for a further 21% of your credit score.

Your credit experience includes:

  • what credit accounts you’ve opened

  • when you opened them

Your credit experience refers to the amount of credit history you have.

For example, if you’re new to credit, there won’t be much evidence of your experience using it. This could explain why your credit score is on the low side.

You should show you have experience of using a variety of credit products responsibly over a longer time — this suggests you know how to manage credit, which can increase your score.

Desire for credit

Your desire for credit makes up 5% of your credit score. Your desire for credit includes:

  • your credit account openings

  • when account openings happened

If you’ve recently opened a few new credit accounts, it could make credit reference agencies think you’re eager for credit. This may cause your credit score to drop.

The more applications you make, the more hard searches will appear on your credit file, which will be visible to lenders and will have an effect on the way they view you.

You should always check your eligibility for credit products before applying. This will show you how likely you are to be accepted. This will use a soft search which, while visible to you, won’t be visible to lenders, so it won't affect your credit worthiness.

On the other hand, if you’ve closed old credit accounts, your credit score may improve.

Types of credit explained

The types of credit you use makes up 5% of your credit score.

Your types of credit can include:

  • overdrafts

  • loans

  • credit card

  • mortgages

  • mobile phone contracts

  • utility bills

  • finance agreements (such as buy now, pay later)

If you have a good reputation for managing different types of credit, it can help to improve your credit score.

For example, if you’ve taken out a loan, you’ll often pay this back in fixed, monthly instalments.

Using a credit card, on the other hand, will have different monthly repayments, depending on how much you spend.

It shows lenders you’re able to handle different credit products and can be trusted to handle more, which can improve your credit score.

You can check your credit report for free with TotallyMoney. Sign up or log in to view your latest credit report and analysis.

Check your credit report now

Five practices that can improve your credit score

  1. make sure you always pay on time and never miss a payment

  2. try to use less than 25% of your available credit across each of your credit accounts

  3. build up a good credit history, this will show lenders how well you can manage credit

  4. avoid making multiple applications in a short space of time as this may act as a red flag and suggest you're credit-hungry

  5. have a variety of credit agreements but avoid high-cost short term credit, such as payday loans

Your credit score: the bottom line

A credit score is a number given to you by a credit reference agency.

This number indicates your creditworthiness – that is, how willing banks and other lenders are to lend you money.

In the UK, there’s no such thing as a universal credit score. The three credit reference agencies all calculate your credit score slightly differently.

Lenders will use different criteria to decide whether to give you credit, but they can use your credit score as a basis for this assessment.

But, as a rule, the higher your credit score, the more likely you are to be accepted for credit and the more competitive interest rates you’ll be offered.

Check your free credit report

See six years of your credit history, and we’ll tell you why your credit score is what it is, plus how to improve it.

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