Money Matters Team

Guide to Credit Scores

By Money Matters Team 27/02/2020

Understanding your credit score

As something that can affect your ability to borrow, credit scores can seem complicated and hard to get your head around. Broadly speaking, they’re used by lenders to determine whether they should give you credit or loan you money. For example, banks, credit card companies, mortgage lenders, mobile phone companies and even insurance providers that take payment via Direct Debit use credit scores to determine how likely you are to be accepted for credit.

They’re looking for someone who’s low-risk, meaning they will be able to meet the repayments. But what makes up a credit score and what can impact it? We've answered these questions and more in our illustrated guide to credit scores.

Why would a company perform a credit check?

Credit comes in many forms, including credit cards, personal loans, overdrafts, utility bills, mortgages, mobile phone contracts, as well as paying for goods in monthly instalments (e.g. a new car or laptop).

Companies that provide such services want to make sure that you’re likely to make the repayments on any loans or credit that they provide. They use your credit score to determine whether to provide you with credit. The score is a summary of your record of your previous lending, credit and repayments in the past which estimates the chances of you defaulting on your lending in the future.

How does credit scoring work?

In the UK, credit scores are calculated by three main credit reference agencies (CRAs) - Experian, Equifax and TransUnion. To calculate your credit score, CRAs are sent information about your credit and how you handle it by lenders. Other things that might affect your credit report include not being registered on the electoral roll and moving home frequently.

Also, lenders may create their own scores using data from CRAs. This includes your credit score, and internal data they hold. This may be used to decide whether to lend to you and if so, the extent of the borrowing.

How to check your credit report

By law, all CRAs must provide you with a free copy of your credit report on request, which can be accessed online. You can also ask for a written copy. It’s a good idea to get one from all three CRAs as they might have information from different credit providers or lenders.

Improving a poor credit score

Having a poorer credit score might mean that you’re seen as high risk. For example, your score could be poor if you’ve defaulted on a previous debt or not paid bills on time. As a result, lenders might reject your credit application or offer you a higher rate of interest.

However, there’s no need to worry just yet as there are plenty of steps you can take to improve your credit score. The Money Advice Service offers the following tips:

  • Pay bills on time

An effective way to prove to lenders that you’re capable of managing your finances.

  • Existing debt

It’s a good idea to try and eliminate any outstanding debts before applying for credit.

  • Register on the electoral roll

It’s much harder to get credit if your name’s not on there.

  • Check for mistakes on your file

Something as small as a slightly wrong address can impact your score.

  • Check for fraudulent activity

If any activity on your credit report doesn’t apply to you (i.e. someone applied for credit in your name), contact the credit reference agency to let them know.

Have a look at our guide below for helpful tips on understanding your credit score and how to manage it.


For a more in-depth look at credit scores, check out our loans and credit cards guide pages for a wide range of helpful tips.

This Money Matters post aims to be informative and engaging. Though it may include tips and information, it does not constitute advice and should not be used as a basis for any financial decisions. Sainsbury's Bank accepts no responsibility for the opinions and views of external contributors and the content of external websites included within this post. Some links may take you to another Sainsbury's Bank page. All information in this post was correct at date of publication.