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What is a bad credit score?
Updated: Tuesday, 2 January 2024
Your credit score is one of several factors lenders consider when you apply for credit. It can affect how difficult it is to take out new credit, whether it be buying a car on finance or opening a credit card.
There are lots of different factors that may cause a bad credit score, but what is a bad credit score? How do you know if you have bad credit, and how might it affect your ability to get finance or a loan?
In this guide, we’ll explain what a bad credit score is, what causes poor credit, and how it might impact your ability to get credit, including vehicle finance.
What is a credit score?
Your credit score is a three-digit number that summarises your financial history and gives lenders a quick way to see what your creditworthiness might be. Your score is calculated using the information in your credit file. This information includes how much debt you have, what credit accounts you are using, and your repayment history.
When you make a finance application, your credit score is one of many factors that lenders will check. They also check your credit history, your income, your identity, and other factors to make sure you are eligible and that any finance they offer is affordable for you.
Learn more about credit scores with help from our guide – what is a credit score?
What's classed as a bad credit score?
Credit reference agencies (CRAs) calculate credit scores using the data supplied by lenders such as banks, car finance companies, and finance providers. In the UK, the three main credit reference agencies are Experian, Equifax, and TransUnion.
Since each credit reference agency uses a slightly different scoring system and categorises credit scores into different bands, there is no universal ‘bad’ score.
It’s also important to know that not every lender reports all of your information to all 3 CRAs. Some might only report information to 2 or 1 CRA, depending on the type of finance. That’s why it might be helpful to check your credit score at each of the CRAs.
In all cases, lower scores represent poorer credit history.
The information below is correct as of 4th July 2023.
Bad credit scores by credit reference agency
What is a bad credit score with Experian?
Experian is the largest credit reference agency in the UK. Its rating scale ranges from 0-999, with ‘very poor’ credit scores being between 0 and 560 and ‘poor’ credit scores being between 561 and 720.
What is a bad credit score with Equifax?
Equifax’s credit rating scale ranges from 0-1000, with ‘poor’ scores being between 0 and 438.
What is a bad credit score with TransUnion?
TransUnion’s rating scale ranges from 0-710, with ‘very poor’ scores being between 0 and 550 and ‘poor’ scores being between 551 and 565.
Bad credit scores with other service providers
Other companies can provide you with your credit report, too. These companies are not credit reference agencies, but they do use the personal and financial information gathered by CRAs to build their own picture of your credit eligibility.
In the UK, two of the most popular credit report services are ClearScore and Credit Karma.
ClearScore and Credit Karma name their scores slightly differently than the CRAs. With ClearScore, the equivalent of a bad credit score is ‘let’s start climbing’ which is 0-409. With Credit Karma, a bad credit score is called ‘needs work’ which ranges from 0 to 565.
Why is my credit score bad?
There are many reasons why you might have a bad credit rating. These may include:
- Being in debt
- Having limited or no credit history
- Missing or late repayments
- High credit utilisation (using a large percentage of your available credit)
- Not being on the electoral register at your current address
- Too many credit applications in a short space of time
- Going bankrupt, defaulting on credit, or having a CCJ or IVA
- Exceeding your credit limits
How can a bad credit score affect my borrowing options?
A poor or very poor credit score can mean it may be more difficult to apply for credit. This is because a bad credit score suggests that you might not be able to manage credit responsibly.
When a lender checks your credit file, they are looking for evidence that you responsibly manage credit (paying your bills in full and on time). If they can’t see any evidence of that, then it’s hard for them to judge if you’d be a responsible borrower.
If they see that you’ve missed payments in the past, or regularly go over your credit limits, then they may see you as a higher risk to lend to.
In practice, a bad credit score could result in things such as:
- A lower credit limit on credit cards
- Higher interest rates on loans or finance
- Mainstream lenders refusing your credit application
Don’t worry, though; a low credit score doesn’t mean you’re unable to borrow money. Some lenders specialise in providing loans to borrowers with low credit scores.
For example, if you’re looking to get a car on finance, there are lenders such as Moneybarn that specialise in bad credit car finance.
Representative 30.5% APR.
Take a look at our guide exploring how hard it is to get car finance, where we go through things that might make it difficult to get approved for car finance.
How can you improve a bad credit score?
Whilst a poor credit score isn’t ideal, there are steps you can take to begin improving it. The reason you have bad credit might be different to another person, but that doesn’t mean there aren’t things you can do that might improve it.
1. Building your credit history
Typically, people with little or no credit history will have lower credit scores, as there is no evidence that they can manage credit responsibly. Building up your credit record with a consistent payment history on any loans, credit card balances, and even utility bills will help to improve your creditworthiness.
2. Paying your bills on time and in full
Missed payments and late or defaulted payments on bills can have a significant impact on your credit score. Missed payments and defaults stay on your credit file for 6 years, so try to prioritise paying your bills on time. One way to ensure you pay bills promptly is by setting up direct debits or standing orders.
If you are experiencing financial difficulty, contact your lender as soon as possible and they will be able to discuss your options.
3. Cutting bad financial ties
If you are financially linked to a bad borrower, it can affect your credit file. You might be financially linked to someone if you have ever opened a joint account, made a joint finance application, or taken out a mortgage together. You can apply for a ‘notice of disassociation’ with all of the CRAs if that person is no longer in your life.
4. Not exceeding your credit limit
Getting close to or going over your agreed credit limits may show that you aren’t responsible with credit. As a general rule, Experian recommends that you only use 30% of your available credit at any given time. For example, if you have £2,000 available on your credit card, you should try to use no more than £600.
5. Keeping credit accounts for a long time
Old accounts show more reliability than newer accounts and prove to lenders that you have experience in managing accounts over long periods of time. Additionally, having lots of different bank accounts will likely make it harder to keep track of your finances which, in some cases, can lead to overdue payments.
6. Cancelling unused credit card accounts
Having lots of unused accounts, such as credit cards or store cards, can lead lenders to decide that you aren’t able to manage accounts effectively. We can’t give financial advice, so do your own research and decide whether or not you need those spare credit cards before deciding to keep or close them.
These are just a few of the factors that can help repair a bad credit score. For more information, check out our guide on how to improve your credit score.
FAQs about a bad credit score
What can I do if I think my credit score is incorrect?
If you spot an error on your credit report, you can file a dispute with the CRAs:
Depending on the nature of the error, you may need to contact the lender in question and ask for them to amend the information they filed to the CRA(s).
You might also consider adding a ‘notice of correction’. This is a 200 word statement that you can add to your credit report, which lenders will see. You can use this to provide context for any missed payments or other aspects of your credit report that you feel are incorrect.
Is there a way I can quickly improve my bad credit score?
There is no one thing that you can do to ‘instantly’ boost your credit score. Paying bills on time, and managing your credit responsibly, will help to build your credit score over a long period of time.
What is the average UK credit score?
It’s difficult to provide one singular average credit score for the whole of the UK since so many factors play a part in calculating someone’s score. Everyone’s financial circumstances are different, as is everyone’s credit score.
What is a good credit score?
A good credit score will differ depending on the credit reference agency you’re using since each uses its own scoring system and rating scale. A good Experian credit score is between 881 and 960, a good Equifax credit score is between 531 and 670, and a good TransUnion score is between 604 and 627.
Your credit score is one of several factors lenders consider when you apply for credit. It can affect how difficult it is to take out new credit, whether it be buying a car on finance or opening a credit card.
There are lots of different factors that may cause a bad credit score, but what is a bad credit score? How do you know if you have bad credit, and how might it affect your ability to get finance or a loan?
In this guide, we’ll explain what a bad credit score is, what causes poor credit, and how it might impact your ability to get credit, including vehicle finance.
What is a credit score?
Your credit score is a three-digit number that summarises your financial history and gives lenders a quick way to see what your creditworthiness might be. Your score is calculated using the information in your credit file. This information includes how much debt you have, what credit accounts you are using, and your repayment history.
When you make a finance application, your credit score is one of many factors that lenders will check. They also check your credit history, your income, your identity, and other factors to make sure you are eligible and that any finance they offer is affordable for you.
Learn more about credit scores with help from our guide – what is a credit score?
What's classed as a bad credit score?
Credit reference agencies (CRAs) calculate credit scores using the data supplied by lenders such as banks, car finance companies, and finance providers. In the UK, the three main credit reference agencies are Experian, Equifax, and TransUnion.
Since each credit reference agency uses a slightly different scoring system and categorises credit scores into different bands, there is no universal ‘bad’ score.
It’s also important to know that not every lender reports all of your information to all 3 CRAs. Some might only report information to 2 or 1 CRA, depending on the type of finance. That’s why it might be helpful to check your credit score at each of the CRAs.
In all cases, lower scores represent poorer credit history.
The information below is correct as of 4th July 2023.
Bad credit scores by credit reference agency
What is a bad credit score with Experian?
Experian is the largest credit reference agency in the UK. Its rating scale ranges from 0-999, with ‘very poor’ credit scores being between 0 and 560 and ‘poor’ credit scores being between 561 and 720.
What is a bad credit score with Equifax?
Equifax’s credit rating scale ranges from 0-1000, with ‘poor’ scores being between 0 and 438.
What is a bad credit score with TransUnion?
TransUnion’s rating scale ranges from 0-710, with ‘very poor’ scores being between 0 and 550 and ‘poor’ scores being between 551 and 565.
Bad credit scores with other service providers
Other companies can provide you with your credit report, too. These companies are not credit reference agencies, but they do use the personal and financial information gathered by CRAs to build their own picture of your credit eligibility.
In the UK, two of the most popular credit report services are ClearScore and Credit Karma.
ClearScore and Credit Karma name their scores slightly differently than the CRAs. With ClearScore, the equivalent of a bad credit score is ‘let’s start climbing’ which is 0-409. With Credit Karma, a bad credit score is called ‘needs work’ which ranges from 0 to 565.
Why is my credit score bad?
There are many reasons why you might have a bad credit rating. These may include:
- Being in debt
- Having limited or no credit history
- Missing or late repayments
- High credit utilisation (using a large percentage of your available credit)
- Not being on the electoral register at your current address
- Too many credit applications in a short space of time
- Going bankrupt, defaulting on credit, or having a CCJ or IVA
- Exceeding your credit limits
How can a bad credit score affect my borrowing options?
A poor or very poor credit score can mean it may be more difficult to apply for credit. This is because a bad credit score suggests that you might not be able to manage credit responsibly.
When a lender checks your credit file, they are looking for evidence that you responsibly manage credit (paying your bills in full and on time). If they can’t see any evidence of that, then it’s hard for them to judge if you’d be a responsible borrower.
If they see that you’ve missed payments in the past, or regularly go over your credit limits, then they may see you as a higher risk to lend to.
In practice, a bad credit score could result in things such as:
- A lower credit limit on credit cards
- Higher interest rates on loans or finance
- Mainstream lenders refusing your credit application
Don’t worry, though; a low credit score doesn’t mean you’re unable to borrow money. Some lenders specialise in providing loans to borrowers with low credit scores.
For example, if you’re looking to get a car on finance, there are lenders such as Moneybarn that specialise in bad credit car finance.
Representative 30.5% APR.
Take a look at our guide exploring how hard it is to get car finance, where we go through things that might make it difficult to get approved for car finance.
How can you improve a bad credit score?
Whilst a poor credit score isn’t ideal, there are steps you can take to begin improving it. The reason you have bad credit might be different to another person, but that doesn’t mean there aren’t things you can do that might improve it.
1. Building your credit history
Typically, people with little or no credit history will have lower credit scores, as there is no evidence that they can manage credit responsibly. Building up your credit record with a consistent payment history on any loans, credit card balances, and even utility bills will help to improve your creditworthiness.
2. Paying your bills on time and in full
Missed payments and late or defaulted payments on bills can have a significant impact on your credit score. Missed payments and defaults stay on your credit file for 6 years, so try to prioritise paying your bills on time. One way to ensure you pay bills promptly is by setting up direct debits or standing orders.
If you are experiencing financial difficulty, contact your lender as soon as possible and they will be able to discuss your options.
3. Cutting bad financial ties
If you are financially linked to a bad borrower, it can affect your credit file. You might be financially linked to someone if you have ever opened a joint account, made a joint finance application, or taken out a mortgage together. You can apply for a ‘notice of disassociation’ with all of the CRAs if that person is no longer in your life.
4. Not exceeding your credit limit
Getting close to or going over your agreed credit limits may show that you aren’t responsible with credit. As a general rule, Experian recommends that you only use 30% of your available credit at any given time. For example, if you have £2,000 available on your credit card, you should try to use no more than £600.
5. Keeping credit accounts for a long time
Old accounts show more reliability than newer accounts and prove to lenders that you have experience in managing accounts over long periods of time. Additionally, having lots of different bank accounts will likely make it harder to keep track of your finances which, in some cases, can lead to overdue payments.
6. Cancelling unused credit card accounts
Having lots of unused accounts, such as credit cards or store cards, can lead lenders to decide that you aren’t able to manage accounts effectively. We can’t give financial advice, so do your own research and decide whether or not you need those spare credit cards before deciding to keep or close them.
These are just a few of the factors that can help repair a bad credit score. For more information, check out our guide on how to improve your credit score.
FAQs about a bad credit score
What can I do if I think my credit score is incorrect?
If you spot an error on your credit report, you can file a dispute with the CRAs:
Depending on the nature of the error, you may need to contact the lender in question and ask for them to amend the information they filed to the CRA(s).
You might also consider adding a ‘notice of correction’. This is a 200 word statement that you can add to your credit report, which lenders will see. You can use this to provide context for any missed payments or other aspects of your credit report that you feel are incorrect.
Is there a way I can quickly improve my bad credit score?
There is no one thing that you can do to ‘instantly’ boost your credit score. Paying bills on time, and managing your credit responsibly, will help to build your credit score over a long period of time.
What is the average UK credit score?
It’s difficult to provide one singular average credit score for the whole of the UK since so many factors play a part in calculating someone’s score. Everyone’s financial circumstances are different, as is everyone’s credit score.
What is a good credit score?
A good credit score will differ depending on the credit reference agency you’re using since each uses its own scoring system and rating scale. A good Experian credit score is between 881 and 960, a good Equifax credit score is between 531 and 670, and a good TransUnion score is between 604 and 627.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
