Your Credit score is a number that reflects how well you manage your finances. It’s important to keep your credit score in check for borrowing money, renting properties, or even for job applications. But what can you do about a bad credit score, how can you check it, and how can you fix it?
To get answers to these questions and more, read on. We’ll help you find out everything you need to know about a bad credit score.
What is a bad credit score?
A credit score is a number that indicates how well you manage repayments. A bad credit score is a number that reflects poor loan repayments or money management. It’s based on factors such as:
- Your payment history
- The amount of debt you have
- The length of your credit history.
A credit score can help or hinder you when you’re trying to borrow money. A bad credit score can make it difficult to get a loan because lenders use credit scores to decide whether to give you a loan. A lower credit score will indicate to lenders that there’s a higher risk of the loan not being paid back.
If you’re able to get a loan, the interest rate will be higher. This can lead to higher monthly payments and more expensive loans overall.
Landlords might check it when you want to rent a property. And even some employers will check it when you apply for a job. So, if your credit score’s bad, it can make your life harder.
How can I check my credit score?
If you want to check your credit score, there are a number of ways you can do this.
1. Go direct to the Credit Reporting Agencies (CRAs).
You can get your credit score for free from the credit reference agencies. There are three of them in the UK, these are:
- Experian
- Equifax
- TransUnion
Lenders will use the information recorded with these agencies to help them decide if they’ll approve your loan. That’s why it’s worth checking it and making sure that what’s on your credit file is accurate.
2. Sign up to a credit monitoring service
Credit monitoring services will give you your credit score for free if you sign up with them. By entering your information, they’ll verify you with the CRAs and give you your credit score. There are a lot of credit monitoring services available, but here are two popular ones.
- Clearscore
- Credit Karma
Registering with a credit monitoring service means you’ll get sent alerts if anything changes. That way, you don’t have to keep checking it as often.
What causes a bad credit score?
There are several factors that can lead to a bad credit score. We’ve listed the most common causes below.
1. Missed or late payments
This is one of the most common causes of a bad credit score. Every time you miss a loan repayment or are late paying it, it affects your credit score. The main reasons people miss their repayments when they’re due are as follows:
- They lost their job.
- They had an unexpected bill they had to pay.
- They suffered an illness, or an injury and they had no sick pay.
2. Maxing out credit cards
If you’re borrowing up to your credit limit, it suggests that you’re not managing your debt. It looks like you’re overstretched and might be struggling. Even if you’re making your payments on time, this will still impact your credit score.
3. Mistakes on your credit file
It might surprise you to know that mistakes on your credit file could hurt your credit score. A simple error with your address could mean your loan application is declined. That’s why checking information on your credit report is important. Check that everything that’s reported on there by your lenders is correct too.
4. Not enough credit history
This is a common problem among younger age groups. At 18 years old, you’re not going to have had the chance to build up a credit history. There are people who have never borrowed money before, so their credit history is limited. With no credit history, there’s no way of knowing if you’re a reliable borrower, and this makes your credit score low.
What is considered a poor credit score?
There’s not one single number that represents a poor credit score. That’s because each credit reference agency has their own credit scoring range. Depending on where you credit score falls within their ranges, that’s how they decide how good your credit score is.
To help you see where your credit score falls, we’ve got the ranges for the CRAs below.
| Credit Score Range | Very Poor/Poor | Fair | Good/Very Good | Excellent |
|---|---|---|---|---|
| Experian | 0-720 | 721-880 | 881-960 | 961-999 |
| Equifax | 0-438 | 439-530 | 531-810 | 811-1,000 |
| TransUnion | 0-565 | 566-603 | 604-627 | 628-710 |
As you can see, generally a credit score below about 550 is classed as poor. If you’ve got a bad credit score, it’s worth doing what you can to try and improve it.
Can I get a credit card with a bad credit score?
Yes, you can get a credit card with a bad credit score. You’re unlikely to be able to take out a card with the high street providers. But there are lenders who’ll give you a credit card.
The best way to find out if you can get a credit card is by checking if you’re eligible to apply with the lender. There are many eligibility checkers available online. This lets you find out which lenders are likely to approve your application before you apply.
Remember that with bad credit, you’ll be offered higher interest rates. That’s why you should always pay off your credit card balance when it’s due.
Can I get a loan with bad credit score?
Yes, just like credit cards, there are lenders who consider offering loans to people with a bad credit score. Lending Stream are a direct lender offering short term loans. When borrowing with a direct lender you know who you’re dealing and can get straight answers.
You can also search for a bad credit loan through a broker. They’ll check with a number of lenders to see who you’re eligible to apply with. Be aware that some brokers may charge fees.
The interest rates you’re offered when you’ve got bad credit are likely to be higher than if you had a good credit score.
How can I fix my bad credit score?
The ways to fix your bad credit score is by taking the following steps.
1. Check your credit report.
Check for errors, monitor your credit file and look out for anything that changes it.
2. Make payments on time.
Every late payment brings down your credit score. By setting up a direct debit you can make sure your payments go out on the day your salary goes in.
3. Don’t make lots of new applications close together.
It makes you look desperate for money, and it impacts your credit score.
4. Register on the electoral roll.
It’ll give your credit score a boost if you’re not already enrolled on there.
5. Remove links to anyone you’re no longer connected to financially.
If they have a poor credit score, it’ll affect you when you apply for credit.
6. Don’t use up all your available credit.
Keep your borrowing to around 30% of your credit limit. Lenders like to see this as it signals to them that you can manage your money well.
Final words
You might think a credit score isn’t important, but it is. It can help or hinder you when you’re trying to borrow money.
But if you have a bad credit score now, don’t worry. It’s fixable so it doesn’t mean you’ll always have a bad credit score. It can change depending on how you manage your money from now on. By following our tips on how to improve your credit score, you can begin to make it a better one.
Disclaimer: We are not providing financial advice. These are just tips for informational purposes. Also, we are not affiliated to any of the external parties linked here, they are provided for reference only.
