Does Universal Credit affect your credit score?

Hannah Scott, Head of Structured Lending, Wednesday, 02 August 2023
Updated: Tuesday, 2 January 2024

If, like many others, you have spent much of your life working to build up your credit score but are now receiving government support, it’s understandable that you’ll want to know precisely how Universal Credit might affect your credit score.

We’ll explain Universal Credit and whether it affects your credit score, and discuss how it all relates to being able to purchase a car on finance.

If, like many others, you have spent much of your life working to build up your credit score but are now receiving government support, it’s understandable that you’ll want to know precisely how Universal Credit might affect your credit score.

We’ll explain Universal Credit and whether it affects your credit score, and discuss how it all relates to being able to purchase a car on finance.

Summary: Your credit score is based on your borrowing history, outstanding debts you have, and your ability to repay credit on time and in full. Claiming benefits such as Universal Credit does not affect your credit score. Having a good credit history is the best way to improve your credit score and show potential lenders that you are a responsible borrower.

Summary: Your credit score is based on your borrowing history, outstanding debts you have, and your ability to repay credit on time and in full. Claiming benefits such as Universal Credit does not affect your credit score. Having a good credit history is the best way to improve your credit score and show potential lenders that you are a responsible borrower.

What is Universal Credit?

Universal Credit is a support allowance provided by the to help those on low incomes to manage their living costs. It is designed to support people of working age who are struggling financially, including those who are out of work, unable to work, or in work but with a low income.

Since it is a means-tested benefit, how much Universal Credit you receive will depend on how much your household earns. We can’t advise whether you are eligible for Universal Credit, so if you’re looking for more information, visit the GOV.UK benefits guide.

To be eligible, you must live in the UK, be aged between 18 and 66 (below state pension age), and have less than £16,000 in savings or investments.

Universal Credit replaces a series of benefits and tax credits, including:

  • Child Tax Credit
  • Housing Benefit
  • Income Support
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)
  • Working Tax Credit.

The UK Government has chosen to phase out the above benefits. This means that, unless explicitly stated otherwise according to your own circumstances, you will no longer be able to make a claim under these benefits systems.

Since the Universal Credit system is managed by the UK Government, recipients of any of the above benefits do not need to do anything in order to start receiving Universal Credit payments each month.

What is a credit score?

Your credit score, sometimes called your credit rating, is a three-digit number that represents your credit history and how likely you are to repay credit.

It is one factor that lenders use when assessing your finance application, whether that be for a loan, credit card, or vehicle finance.

Different credit reference agencies (CRAs) use different scales to define credit ratings. In the UK, the three main CRAs are:

Having a low credit score can indicate that a person is a greater risk for lenders, whilst a good or very good credit score typically suggests that you are responsible with credit.

Learn more about credit scores with help from our guide – what is a credit score?

Does Universal Credit affect credit scores?

If you are claiming Universal Credit, it doesn’t affect your credit score. This is because your credit score is based on your borrowing history, the amount of debt you have, and if you repay credit on time and in full.

Your credit rating is not influenced by the source of your income. Regardless of whether you are self-employed, have a part-time job, or receive Universal Credit, you can still build up a good credit score by paying your bills in full and on time.

Check out our guide that explains more factors that affect your credit score.

Does Universal Credit appear on your credit report?

Your sources of income do not show on your credit report. Also, benefits such as Universal Credit do not appear on your credit report.

It’s important to know that lenders may ask for proof of income when you’re applying for finance. Even though it won’t show on your credit report, the lender may ask for your award notice or another kind of proof that you are receiving Universal Credit.

Can you get vehicle finance when receiving Universal Credit?

There is a common misconception that you won’t be approved for car finance if you’re on benefits. Everyone’s eligibility for car finance is different, and so is every lender’s criteria for what they accept.

When considering an application, a lender will look at a variety of factors to ensure that any finance they offer is affordable and suitable for you.

Some lenders might not accept applicants with Universal Credit, but we understand that just because you are claiming benefits, doesn’t change the need for a reliable car to get around.

When applying with us, we treat Universal Credit as an ‘additional income’. This means that you must have an income, pension, or DLA/CA/PIP alongside it. Your total monthly income must total £1,000 or more after tax.

If you decide to make a joint car finance application, then your combined monthly income must be £1,300 or more after tax.

For more information, we’ve written a page that explains how the process works.

Representative 30.5% APR.

FAQs about Universal Credit and your credit score

You do not need to pay back your regular monthly Universal Credit payments. However, there may be exceptions to this, depending on your circumstances.

The only exceptions to this rule are as follows:

  • You have been overpaid due to misrepresentation or failure to disclose certain details about your financial circumstances. Any overpayments will have to be repaid. More information on benefit overpayments can be found on the GOV.UK website
  • You have been paid a Universal Credit advance to help you manage your living costs until you receive your first Universal Credit payment. For further guidance on advances, visit the GOV.UK website.

In both the above situations, the money you owe will be deducted gradually from future Universal Credit payments.

We cannot provide financial advice, so if you aren’t sure if this affects you, you could contact a not-for-profit debt advice charity such as StepChange.

The following things may cause your credit score to drop:

  • Lots of applications for credit in a short space of time
  • Being at or close to your credit limit
  • Missing payments or making late payments
  • Current or previous debt problems such as an IVA or CCJ.

There are lots of factors that can affect your credit score, but it’s important to know that claiming benefits doesn’t affect your score or show on your report in any way.

Since your credit rating can affect whether or not your applications for finance are approved by lenders, you might want to know what steps you can take to improve your credit score.

Whilst no two situations are exactly alike, the following things could help to improve your credit rating:

  • Being registered on the electoral roll
  • Paying all your bills on time and in full
  • Cut bad financial ties.

You may also wish to sign up for services such as Experian, which allow you to keep track of your credit score. Some credit report services provide tips that are based on specific aspects of your credit report.

What is Universal Credit?

Universal Credit is a support allowance provided by the to help those on low incomes to manage their living costs. It is designed to support people of working age who are struggling financially, including those who are out of work, unable to work, or in work but with a low income.

Since it is a means-tested benefit, how much Universal Credit you receive will depend on how much your household earns. We can’t advise whether you are eligible for Universal Credit, so if you’re looking for more information, visit the GOV.UK benefits guide.

To be eligible, you must live in the UK, be aged between 18 and 66 (below state pension age), and have less than £16,000 in savings or investments.

Universal Credit replaces a series of benefits and tax credits, including:

  • Child Tax Credit
  • Housing Benefit
  • Income Support
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)
  • Working Tax Credit.

The UK Government has chosen to phase out the above benefits. This means that, unless explicitly stated otherwise according to your own circumstances, you will no longer be able to make a claim under these benefits systems.

Since the Universal Credit system is managed by the UK Government, recipients of any of the above benefits do not need to do anything in order to start receiving Universal Credit payments each month.

What is a credit score?

Your credit score, sometimes called your credit rating, is a three-digit number that represents your credit history and how likely you are to repay credit.

It is one factor that lenders use when assessing your finance application, whether that be for a loan, credit card, or vehicle finance.

Different credit reference agencies (CRAs) use different scales to define credit ratings. In the UK, the three main CRAs are:

Having a low credit score can indicate that a person is a greater risk for lenders, whilst a good or very good credit score typically suggests that you are responsible with credit.

Learn more about credit scores with help from our guide – what is a credit score?

Does Universal Credit affect credit scores?

If you are claiming Universal Credit, it doesn’t affect your credit score. This is because your credit score is based on your borrowing history, the amount of debt you have, and if you repay credit on time and in full.

Your credit rating is not influenced by the source of your income. Regardless of whether you are self-employed, have a part-time job, or receive Universal Credit, you can still build up a good credit score by paying your bills in full and on time.

Check out our guide that explains more factors that affect your credit score.

Does Universal Credit appear on your credit report?

Your sources of income do not show on your credit report. Also, benefits such as Universal Credit do not appear on your credit report.

It’s important to know that lenders may ask for proof of income when you’re applying for finance. Even though it won’t show on your credit report, the lender may ask for your award notice or another kind of proof that you are receiving Universal Credit.

Can you get vehicle finance when receiving Universal Credit?

There is a common misconception that you won’t be approved for car finance if you’re on benefits. Everyone’s eligibility for car finance is different, and so is every lender’s criteria for what they accept.

When considering an application, a lender will look at a variety of factors to ensure that any finance they offer is affordable and suitable for you.

Some lenders might not accept applicants with Universal Credit, but we understand that just because you are claiming benefits, doesn’t change the need for a reliable car to get around.

When applying with us, we treat Universal Credit as an ‘additional income’. This means that you must have an income, pension, or DLA/CA/PIP alongside it. Your total monthly income must total £1,000 or more after tax.

If you decide to make a joint car finance application, then your combined monthly income must be £1,300 or more after tax.

For more information, we’ve written a page that explains how the process works.

Representative 30.5% APR.

FAQs about Universal Credit and your credit score

You do not need to pay back your regular monthly Universal Credit payments. However, there may be exceptions to this, depending on your circumstances.

The only exceptions to this rule are as follows:

  • You have been overpaid due to misrepresentation or failure to disclose certain details about your financial circumstances. Any overpayments will have to be repaid. More information on benefit overpayments can be found on the GOV.UK website
  • You have been paid a Universal Credit advance to help you manage your living costs until you receive your first Universal Credit payment. For further guidance on advances, visit the GOV.UK website.

In both the above situations, the money you owe will be deducted gradually from future Universal Credit payments.

We cannot provide financial advice, so if you aren’t sure if this affects you, you could contact a not-for-profit debt advice charity such as StepChange.

The following things may cause your credit score to drop:

  • Lots of applications for credit in a short space of time
  • Being at or close to your credit limit
  • Missing payments or making late payments
  • Current or previous debt problems such as an IVA or CCJ.

There are lots of factors that can affect your credit score, but it’s important to know that claiming benefits doesn’t affect your score or show on your report in any way.

Since your credit rating can affect whether or not your applications for finance are approved by lenders, you might want to know what steps you can take to improve your credit score.

Whilst no two situations are exactly alike, the following things could help to improve your credit rating:

  • Being registered on the electoral roll
  • Paying all your bills on time and in full
  • Cut bad financial ties.

You may also wish to sign up for services such as Experian, which allow you to keep track of your credit score. Some credit report services provide tips that are based on specific aspects of your credit report.

 
Hannah Scott, Head of Structured Lending
Bringing you guides that simplify the complex world of credit.
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