Credit scores vary depending on credit reference agencies. With the changing economic situation, what is the average credit score in the UK in 2023, what makes a good credit score, and how can you improve it? We have the inside scoop.
In most countries, you must have a good credit score before accessing a loan. Credit scores are like grades that help determine your ability to get approved for a loan and other financial products. The higher your score, the better your chances of getting approval.
This article will explore the UK credit score in 2023, its averages, how it is calculated, and what factors impact it. We will also cover what is considered a good credit score and how to improve your score.
Key Takeaways:
- Credit scores in the UK range from 300-850 and are calculated based on your credit report, which is compiled by credit reference agencies such as Experian, Equifax, and TransUnion.
- Payment history and debt-to-income ratio are two significant factors that impact your credit score. Making timely payments and keeping your debt balanced are crucial for a good score.
- Your credit report only lasts for six years, so keeping it clean is important. Any missed payments or debts should be rectified with subsequent timely payments, and too many new credit applications can lower your score.
- Credit scores are different from credit ratings, with the former applying to individuals or small businesses, and the latter to large entities such as corporations.
What is a Credit Score?
A credit score is a number that represents and provides a snapshot of your financial history. Credit agencies calculate it based on the information in your credit report. It helps show how likely you will repay what you borrow on time and in full.
Before you get a loan, lenders will request your credit scores. To do this, they contact credit reference agencies (CRAs). Experian, Equifax, and TransUnion remain the biggest CRAs in the UK used by lenders to assess your creditworthiness. Crediva is an alternative to these three, with a different methodology.
The three biggest CRAs have a similar credit scoring system of 300-850 based on FICO and VantageScore credit scores. Your lenders might see different scores from each CRA, even if you have a perfect credit history. When this happens, they check your credit history with all three for certainty.
How Is Credit Score Calculated in the UK in 2023?
In the UK, Experian, Equifax, and TransUnion calculate most credit scores. They collect information from various sources, such as lenders, banks, and utility companies, to detail your financial history. They then compile the data into a credit report to determine your score using a professional scoring system.
However, the information on credit reports only lasts for six years. So, whether you have a paid or unpaid debt on your credit file, the credit reference agencies will remove it after that period. The bottom line is to keep your credit report clean, keep an eye on it and ensure you get the best deals when applying for loans or credit cards.
Factors That Impact Your Credit Score
Understanding the credit score calculation and its impact is essential. The following are some of the most common factors that can influence your credit score:
- Payment History
If you want a good credit score, making all your timely payments is essential. When you pay your bills late or miss payment altogether, this will negatively impact your credit score as it makes up 35 percent of your bill. In the UK, missed payments will stay on your file for six years and are often removed only if you displace them with subsequent timely payments.
- Amount Owed
Your debt makes up 30 percent of your credit score, so keeping this balanced is essential. In the UK, lenders typically look at the total amount you owe compared to your income. This ratio is your debt-to-income ratio and should not exceed 36 percent of your monthly earnings. The higher your debt-to-income ratio is, the more likely you will be considered a high credit risk.
- Length of Credit History
British lenders look at the average age of your accounts to determine your credit score. For example, if you opened a credit account in 2013 and another in 2023, your average account age will be ten years. The longer the average age of your accounts, the better your score.
- New Credit
Each time you apply for a new line of credit, such as a credit card, mortgage, or loan, it will impact your score. You must be careful with the number of applications you submit in a given period because each could lower your score. If you have too many new accounts opened within the last year, this could lead lenders to believe you are overextended and will put them off.
- Credit Mix
A healthy mix of different types of credit accounts will help lenders understand that you can manage other types of debt, which you can use in building up a positive credit history. For example, if you have an instalment loan such as a mortgage or car loan on your report, this will show that you can make monthly payments on time and help improve your score.
Credit Score vs Credit Rating (2023 Comparison)
Credit scores and credit ratings differ, but people often use them interchangeably.
| Credit Score | Credit Rating |
| Three-digit number | Letter grade |
| Ranges from 300 to 850 | Ranges from AAA to D |
| Determines creditworthiness | Indicates likelihood of on-time debt repayment |
| Assessed by Experian, Equifax, and TransUnion | Carried out by agencies such as S&P, Fitch Group, and Moody’s Investor Services |
| Measures an individual’s ability to repay a loan | Measures the financial strength and creditworthiness of an entity such as a company or government |
| Used by lenders to approve or deny loans | Used by investors to evaluate investment risk |
| Applies to individuals or small businesses | Applies to large entities such as corporations |
Credit scores are three-digit numbers that lenders use to determine your creditworthiness and whether to approve or deny you for a loan. Your score can range from 300 to 850, and getting higher is better.
Credit ratings are letter grades—AAA through D—and indicate how likely you are to repay your debts on time and in full. If a lender has given you an A rating, the agency considers you a reasonable risk for lending because it believes there is little chance you will default on your loan.
Credit scores are assessed majorly by three credit reference agencies: Experian, Equifax, and TransUnion. On the other hand, credit ratings are carried out by the agencies such as Standard & Poor’s (S&P), Fitch Group, and Moody’s Investor Services.
While credit scores gauge the ability of an individual to repay a loan, credit ratings are an assessment of the financial strength and creditworthiness of an entity such as a company or government. So, we can say a credit score is to individuals what a credit rating is to corporations.
Average Credit Score Range in the UK (2023)
FICO and VantageScore typically set a range for credit scores in the US, from 300 to 850. In the UK, different credit reference agencies have criteria for assigning a credit score to an individual.
For example, Experian sets its range from 0 to 999, Equifax uses 0 to 1000 (from the 0-700 old scoring system), and TransUnion uses 0 to 710. Here is information about the average credit according to each CRA:
Experian
Experian puts the average credit score in the UK for 2023 at 797, which is fair. Lenders still have to decide what they consider acceptable to them or otherwise.
| Score | Band |
| 0-560 | Very Poor |
| 561-720 | Poor |
| 721-880 | Fair |
| 881-960 | Good |
| 961-999 | Excellent |
Equifax
The average credit score in the UK with Equifax in 2023 is 380, based on ClearScore estimates. This average is fair but not absolute to all lenders.
| Score | Band |
| 0-279 | Very poor |
| 280-379 | Poor |
| 380-419 | Fair |
| 420-465 | Good |
| 466-700 | Very good |
| 700-1000 | Excellent |
TransUnion
TransUnion’s range of average credit scores in the UK for 2023 is between 551-710. The average is unique and subjective to all lenders.
| Score | Band |
| 0-550 | Very Poor |
| 551-565 | Poor |
| 566-603 | Fair |
| 603-627 | Good |
| 628-710 | Excellent |
Credit Score by Age Groups
In determining your credit score, certain factors help you determine where you stand. Your age does not determine what your credit score should be. However, certain age groups have an average credit score higher than others, as regarded by FICO.
This is because some age groups have more experience dealing with financial matters and how they affect their lives. The table next is an overview of the average credit scores for each age group.
| Age | Credit Score |
| 18-24 | 679 |
| 25-40 | 686 |
| 41-56 | 705 |
| 57-75 | 740 |
| 76+ | 760 |
Source: FICO
Credit Score by Regions in the UK
The average credit score in the UK varies from region to region. There are many regions in the U.K., but the table below examines the parts with the best credit scores.
| Region | Credit Scores |
| City of London | 893 |
| Isles of Scilly | 886 |
| Wokingham | 880 |
| Chiltern | 879 |
| Elmbridge | 872 |
| Hart | 872 |
| Waverley | 871 |
| St Albans | 871 |
| South Cambridgeshire | 869 |
| Brentwood | 850 |
Source: Experian
Credit Score by Income
The rule of thumb is that the higher your income level, the higher your credit score. The table below shows the average credit score by income level according to the findings of the Federal Reserve Bank of New York.
| Annual Income | Average Credit Scores |
| Low Income | 658 |
| Moderate Income | 692 |
| Middle Income | 735 |
| High Income | 774 |
Source: Federal Reserve Bank of New York
What Is Considered a Good Credit Score in the UK in 2023?
Generally, your credit is good if you score between 881-960. Know that the standards for good credit scores differ from those used to define poor scores. Therefore, anything below 600 is often a poor credit score. Anything above 600 is often good.
Another thing is that what’s considered a good credit score by TransUnion may not be so with Equifax and Experian. The three credit reference agencies use different scoring models to calculate your credit scores. As such, each of them will give you a different score based on their standards.
Importance of a Good Credit Score
A good credit score is essential for many reasons, including:
- Access to Credit
A good credit score indicates that you are a low-risk borrower and can be trusted to repay your debts. This is why lenders use the information on your credit report to decide whether or not to give you a loan. Getting approved for any loan, including mortgages, may be difficult if you have a poor credit score.
- Lower Interest Rates
A good credit score means you have a low risk of defaulting on your loans. This will allow you to access lower interest rates on your credit cards, home loans, auto loans, and any other type of loan. Also, it will save you significant money in interest charges over the life of your loans and credit accounts.
- Better Credit Terms
A good credit score also means you will qualify for better credit terms. For example, if you have a high credit limit on your card and your payment history is spotless, your issuer may increase your available credit. This can be especially helpful if you plan to make large purchases shortly.
- Insurance Discounts
You may qualify for insurance discounts if you have a good credit score. Many insurance companies offer discounts on car insurance, health, and life coverage to customers with good credit. By keeping your credit report clean and managing your finances responsibly, you can save hundreds of dollars yearly in premiums.
How to Check Your Credit Score in 2023
There are many ways to check your credit score. You can request it directly from the three major credit bureaus, Equifax, TransUnion, and Experian, which will provide you with a free copy of your report. Equifax, for instance, can provide you with six copies of your credit score each year by registering with them.
By visiting third-party credit score services, you can get a free copy of your credit reports once every twelve months from each credit reference agency. You can also ask your lender or credit card provider to check your score. Once you get a free credit score copy, check that it is correct, proper, and accurate.
Tips to Improve Your Credit Score in 2023
Improving your credit score takes time and effort, but the following tips can help you get started:
- Check Your Credit Report
Check your credit report regularly to ensure the information is correct and up-to-date. If you find any errors, dispute them with the credit reference agency that provided the information. Remember that it can take three to six months for a mistake to be amended.
- Reduce Your Debt
Reducing your debt can help you improve your credit score. Paying off any outstanding loans will reduce your available credit and show lenders your repayment capacity. If you’re struggling with paying off debts, try to negotiate with creditors so that they lower interest rates or extend repayment periods.
- Keep Credit Card Balances Low
Keeping your credit card balance low is essential to improving your credit score. If you have a zero balance on your accounts, it will help show lenders that you are responsible for using credit. This will help them determine whether or not they should lend you money.
- Use Different Types of Credit
The more types of credit you have, the better. If you have a variety of credit cards with different issuers and banks, this will help lenders see they can trust you to pay them back on time. It also shows them that you are responsible for managing money.
Last Credit Statement
Understanding your credit score in the UK is essential to access credit and getting the best deals. By knowing what factors impact your credit score and how to improve it, you can take control of your finances and achieve your financial goals.
