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How your credit score is calculated

How your credit score's calculated and why the higher it is, the better

Knowing your credit score is brilliant. It’s a big step towards understanding your finances and is a useful, easy to digest way to sum up years of complicated, in-depth data about you. But, how many times have you looked at your credit score and thought “wow, that’s not the number I was expecting”?

That’s why as well as knowing the number, it’s important to know where it came from and how your credit score is calculated. We can help you get your noggin around what’s going on behind the scenes of the credit scores you see, so the number hopefully makes a bit more sense!

Before we start…

You know the saying “Beauty is in the eye of the beholder”? Well, credit scores are a bit like that.

When your credit score gets calculated – by a credit reference agency or by a lender you apply to – whoever is doing the calculating will have their own way of working out what score you get from them.

Credit reference agencies work out your credit score to give you the best general impression they can of how good – or not – your credit history looks to lenders. But, when you apply for credit, lenders request a copy of your credit report from one or more of the credit reference agencies, and then use the information in it to work out a unique credit score for you based on what they’re looking for in a customer. And, all lenders have slightly different criteria on this front. 

This means that in the UK at least, your credit score isn’t one single, magic number that follows you around and how high or low it is depends on who you’re asking.

What goes into your credit score

While you don’t just have one credit score, there are some general rules about what information from your credit report lenders are looking at when they work out your credit score.

How many accounts you have, and how old they are

Lenders will look at both how many accounts you have, and how old they are, when they’re working out your credit score. This might seem like a weird thing for them to focus on, but there is method in their madness! Your credit report might only capture six years’ worth of details like your payment history, but it also shows key information like when your accounts were opened. Accounts that were opened longer ago than your credit report typically covers and are still in use now show that you have a long history of managing your accounts well – something lenders tend to look favourably upon.

Of course, sometimes it’s the right thing to do to switch to a different account provider. Perhaps you can save money on interest by doing a balance transfer to a new credit card. Or maybe you want to switch to a different current account to access better features. Occasional switches are normal, but chopping and changing too often can raise a red flag and go against you when your credit score is calculated.

Your existing borrowing

When working out your credit score, lenders will look at how much you owe – or could owe – to other lenders that you have accounts with, to make sure that if they gave you the loan or credit card you’ve applied for, you’d be able to afford to pay it back.

Lenders will look at both how much you currently owe to other lenders, and what your credit limits are on your accounts with them. The reason they look at both these things is because while your balances show what you owe right now, your credit limits show how much you could borrow in total, and lenders want to know where money they lend you will fit in and if it’s responsible of them to increase the amount of money you owe, or could borrow. If you’re already borrowing a large portion of the credit you have available to you, then this could count against you when your credit score is worked out.

Your payment history

Borrowing money is one thing, paying it back is another. And lenders are looking at both. As a rule of thumb, lenders use what you’ve done in the past to predict what you’ll do in the future. So, if your payment history includes occasions where you haven’t made the payments expected of you on time, then this might cause lenders to believe this could happen again, even if the last time it happened was a long time ago.

How much missed payments in your history affect your credit score really depends on the exact situation, and on individual lenders’ criteria. A single missed payment surrounded by other payments – before, after, and around the same time – that were made on time could be chalked up to a one-off mistake. But a history that includes records of you arranging reduced payment plans or debt management plans to repay what you’ve borrowed, or missing so many payments to a lender that they place a default on your credit report, could be a sign that you’ve had financial difficulties. Some lenders will have strict rules about missed payments and will outright refuse to lend to anyone with even a single missed payment in their history. Others may be more flexible and willing to lend to people with these kinds of events in their credit histories. But, you may find that if you have missed payments in your credit history, even very old ones, you end up paying higher interest rates when you borrow.

Your electoral roll status

Whether or not you’re registered to vote, and how long you’ve been registered for at your address, is an important piece of information that’s used when calculating your credit score. Being on the electoral roll at your address is a sure sign to lenders that you live where you say you do and makes it easier for them to verify your identity.

Registering on the electoral roll doesn’t mean you have to vote if you don’t want to, and you can also limit your registration to the “full register”, which means your details will only be used for election and referendum related communications, credit checks, jury summons, and by the police. Your information won’t be included in the version of the electoral register that’s available to anyone who wants to buy a copy.

Public records

There are some events in your finances – particularly if you’ve been in debt in the past – that are a matter of public record. Bankruptcy, IVAs and CCJs all go through the court system, and because of this, they get recorded in a database called the Register of Judgements, Orders and Fines. Information from the Register of Judgements, Orders and Fines is then shared with the credit reference agencies who put together your credit report. So if you have been made bankrupt, had an IVA or have had a CCJ filed against you in the time period your credit report covers (remember, this is six years), then this will be included in your report and used by lenders when they calculate your credit score.

For the most part, the inclusion of something like bankruptcy, an IVA or a CCJ in your credit report is a red flag to lenders that you’ve had issues with your finances in the past, and will count against you when they calculate your credit score. But having these types of events in your history might not always mean a low credit score from all lenders. If your financial issues were a long time ago, and the lender can see that not only have the issues been resolved through you settling a CCJ or being discharged from an IVA or bankruptcy, but that you’ve also taken steps to rebuild your credit history and show that you can and will pay back what you borrow, then depending on the lender, past difficulties could count against you much less those that are more recent, or ongoing.


There are two types of searches that are included in your credit report, but only one that counts towards your credit score. Soft searches are included in your report for your reference, but they’re for your eyes only – they don’t count towards your credit score. Hard searches, which mostly happen when you apply for credit or if an account you have is referred to a debt collection agency, do get factored into the equation when your credit score is calculated.

Not having many hard searches on your credit report is generally a sign that you’re managing your finances well, but what constitutes “not many”? In CredAbility, having more than three hard searches on your credit report in a 12 month period will raise a red flag, but lenders may see it differently and have their own ideas about how many is too many!

We’ve written more about hard and soft credit checks in a guide of their own – be sure to check it out!

How is your credit score calculated?

Now you know what counts towards your credit score, let’s look at how all this information is used to give you a number that sums it up.

As we touched on before, there’s no one set credit score calculation that’s used by everybody. Lenders all have their own criteria to decide who they will and won’t offer credit to. Your credit score is calculated, in simple terms, by comparing your credit history to a lender’s criteria to see how closely they match. A lender’s acceptance criteria also allow them to decide that some parts of your credit history are more important to them than others, and the important parts count more towards your credit score with them than the parts they’re less interested in.

This results in an incredibly complicated set of formulas, algorithms, and sums that all work together to allocate you a credit score. The calculations are complicated that you would need to be an actual computer to make head or tails of the maths.

On top of that, no lender shares their lending criteria. In the world of loans and credit cards, a lender’s criteria are their secret sauce and sharing them would allow all their competitors to do the same thing. But, credit reference agencies, by analysing all of the information from lenders that passes through them to be filed in individual credit reports, have a pretty good idea of what types of things mean a lender will give you a good score and approve your application to them, vs what results in a bad score and a rejected application. This is how they’re able to offer you their own version of your score, and help you see how lenders are likely to view applications you might make to them.

What else counts towards lenders’ decisions?

Of course, your credit score is only part of the story when it comes to lenders deciding whether to offer you credit or not. Let’s run down a couple of the other main things they consider.

Your income

Lenders may look at your income alongside how much you’re asking to borrow and how much you already owe to other companies, and compare what you say you have coming in to the amount of money you already owe, or could borrow. Lenders use this comparison alongside their credit score calculation for you to decide if lending you money is not only something they could do because your credit history matches their criteria, but should do, because you can afford to pay them back without it causing you any hardship. This will have a big impact on a lender’s decision to give you a loan or credit card, and shows how you could have a credit score that’s thought of as good or even excellent, but still not be guaranteed to be approved for any and all money you want to borrow.

Notices of correction

If, having seen the information in your credit report, you find that the information there is technically accurate, but doesn’t tell the whole story, then you can request that a credit reference agency add a note to your report that explains things further. This is called a “Notice of correction”. You might request a Notice of Correction be added to your account, for example, if you’re not eligible to vote in the UK, explaining why you aren’t on the electoral roll. Or, perhaps there were special circumstances surrounding a period of missed payments in your credit history that you’d like to explain, so lenders can see it isn’t typical of your behaviour. Notices of Correction are made visible to lenders you apply to. They don’t count towards your credit score, but may still be factored into a lender’s decision on your application.

Now you know the number and where it comes from, learn about what it means in our guide on understanding the credit score range!

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