Here we look at how to improve your credit data, understand your accounts and get better offers from lenders.
Here we look at how to improve your credit data, understand your accounts and get better offers from lenders.
Credit may refer to three different things:
An agreement that lets you borrow from a lender and pay them back later
Data about how you’ve managed credit agreements in the past, your current borrowing and other things
Being “in credit” on an account, which means the lender owes you
Credit agreements
A credit agreement gives you access to money, a service or a product before you pay for it. For example, it’s possible to:
Borrow money with a loan and pay it back over time
Get a car with car finance and make payments towards it each month
Spread the cost of a purchase over time with buy-now-pay-later
Pay for electricity and gas after you use it (not before) with an energy tariff
Credit data
If you see terms like “good credit” and “bad credit”, we’re talking about your credit data and how lenders see it. This data includes things like how much you’ve borrowed in the past, if you made payments on time and how much you currently owe.
Being in credit
With a credit agreement, you should get statements that show how much you owe. If it says you’re “in credit” then you have money on the credit account. The lender owes you — possibly because you overpaid them, were refunded or got paid rewards. Depending on your lender’s terms you may be able to spend the amount, get it back in cash or use it on next month’s bill.
Credit agreements work in various ways depending on the type of credit — such as instalment credit, revolving credit, and secured or unsecured credit. We explain these types below. Lenders charge for borrowing. You’ll usually pay interest and sometimes fees. Interest is calculated as a percentage of the amount you owe.
Credit data helps lenders decide whether to approve you for a credit agreement. Lenders may turn you down if you have bad credit or no credit. Bad credit is caused by things like late payments, defaults and bankruptcy. Having little or no credit history is common if you’re new to the UK or you’ve never used credit before. Luckily there are ways to build credit.
Companies may access your credit data when you apply for credit, to rent a home, a job and more. They may do a credit check to search information on your credit report.
Your credit report includes information about your past borrowings and payments, current credit agreements, address history, financial connections and more. This information is collected and held by credit reference agencies like Experian.
You can check your statutory credit report for free with Experian. We also use the information on your report to calculate your Experian Credit Score.
Your credit score is a number that reflects how reliable you are when it comes to repaying money. You don’t have just one score — each company has its own way of calculating it. The company typically looks at information taken from your credit report, your application form, and its own records (if you’ve been a customer before).
Lenders won’t tell you your score. But you can check your Experian Credit Score with us for free. It gives you an idea of how lenders see you. The higher your score, the more likely you’ll be accepted for credit at the best rates. And because the number isn’t set in stone, you may be able to improve your score.
Credit can affect many areas of your life, such as how you manage your finances and where you’re able to live and work. Having good credit makes it easier to:
Qualify for new credit agreements. Your credit score affects which credit cards and loans you can get approved for and the interest rates you'll pay.
Finance major purchases. Credit is crucial if you plan to borrow money for something big, like a new car or home improvements.
Rent a home. Some rental companies and landlords check your credit score as part of the application process. A low score can disqualify you from some rentals or mean you’re asked for a bigger deposit or a guarantor.
Buy a home. Building credit well before you're ready to get a mortgage can help you get approved.
Get cheaper insurance. Some companies take your credit data into account when calculating your premiums for home and car insurance.
Manage household bills. Some utility companies check your credit report before giving you a tariff. You may have to prepay your bills if you have poor credit.
Apply for a job. Some employers do credit checks before offering a job – especially if the role involves handling money.
Building a good credit history takes time and consistency, but it’s worth the effort. Here are some steps to help you start:
Understand your score. Learn what affects your credit score so you know how to look after it in the future.
Check your credit report. Look for anything that may be lowering your score, such as overdue payments. Want personalised tips to improve your score? Try a paid CreditExpert subscription.
Consider taking out credit. If you don’t have much credit history, borrowing can improve your credit over time if you make the payments on time and in full. Some credit is designed with this in mind, such as credit builder cards.
Build credit with everyday payments. You may be able to give your score an instant lift with Experian Boost. Use it to share information about your payments for your phone contract, utilities, insurance, and streaming services.
Make on-time payments. Payment history is a big factor when it comes to getting credit. Budget for payments and consider setting up standing orders to avoid late payments.
Don't max out your credit cards. Try to use no more than 25% of your available credit. This percentage is called your "credit utilisation" — lower is better.
Avoid applying for credit too often. Your score dips with each credit application. Space them out and only apply for credit you’re likely to get.
Whether you plan to borrow soon or you’re building credit for the future, it’s worth regularly checking your free Experian Credit Score. It gives you an idea of how lenders see you, which may change over time. Your score updates every 30 days if you log in. Viewing your score won’t affect it.
Need a bit more help? Try a paid CreditExpert subscription. You’ll get full access to your Experian Credit Report, personalised tips to improve your score, alerts about certain changes on your report, and more. New customers get a free 30-day trial, then it’s £14.99 a month. And if it’s not for you, simply cancel any time.
Most types of credit are either instalment credit or revolving credit. Credit can also be secured or unsecured.
Instalment credit
Instalment credit includes things like loans and mortgages. You borrow a set amount of money and make regular payments over a fixed period. Let’s say you take out a £5,000 loan over 3 years. You’ll get access to the £5,000 at the start of your agreement. You’ll then make payments to the lender each month for 3 years. Added together, these payments equal the amount you borrowed plus interest and any fees. Your lender will close the account when you’ve paid them back in full.
Revolving credit
Revolving credit lets you borrow up to a set credit limit. Unlike instalment credit, the monthly repayments are flexible — you choose the amount as long as it meets the minimum payment. You’ll usually pay interest on any amount you carry over to the next month. You won’t pay interest if you pay off the card in full each month.
A revolving credit account won’t close when you pay it off. You can typically borrow and repay as many times as you like. Just make sure to use your card responsibly.
Credit cards are an example of revolving credit. There are several types of credit card including:
Credit cards also give you purchase protection on goods and services costing between £100 and £30,000. This means the lender may cover the cost of things like faulty, damaged or undelivered items if the seller won’t refund you.
Secured credit
Secured credit is tied to an asset you own, such as your home or car. If you don’t repay your lender, they can sell the asset as a last resort to get their money back. This means there’s a risk of losing your home or car when you take out secured credit. Types of secured credit include mortgages and homeowner loans.
Unsecured credit
Unsecured credit isn’t tied to an asset, meaning there’s less risk for you and more risk for the lender. You may need a good credit score to get approved, especially for the best rates. Types of unsecured credit include personal loans and credit cards.
Various organisations offer credit including:
Banks. These financial institutions may help you save, spend, invest and borrow. Many banks offer credit cards, loans and mortgages. It’s also possible to get an arranged overdraft, which is a type of credit attached to your current account.
Supermarkets. Store credit can only be used within the chain. Supermarkets may also offer general credit cards, which can be used anywhere and are typically backed by banks.
Buy-now-pay-later providers. When you’re shopping online, you may see an option to spread your payments with schemes like Klarna, Clearpay and Laybuy. These schemes are run by companies that are separate from the store you’re buying from.
Payday loan companies. Payday loans are generally aimed at people with poor credit who need emergency cash. They’re short-term and very expensive, often with interest rates of around 1,500%.
Credit unions. These are financial co-operatives that reinvest their profits locally. They offer small loans that may be a cheaper alternative to payday loans. You’ll need to become a member, which may depend on things like your location and job.
Car finance companies. Some lenders specialise in providing car finance such as hire purchase agreements and personal contract purchases (PCP). You’ll usually make a deposit and monthly payments. You won’t own the car until the end of the agreement. With PCP, you’ll either return the car or make an extra payment for ownership.
Logbook lenders. Logbook loans are a type of secured loan that’s tied to your vehicle. They have high interest rates and you may lose your car if you miss payments.
Peer-to-peer lenders. P2P websites connect you with people or businesses who can lend you money. It’s a way to borrow without going through traditional financial companies.
Experian doesn’t provide credit — but we can help you compare credit from a range of lenders. We also calculate your chances of approval when you search credit cards and personal loans so you can apply with confidence.
Remember, a good credit score gives you access to better offers. See how your Experian Credit Score is doing. It updates every 30 days if you login. Viewing your score won’t affect it.