What is the Average Credit Score in the UK? Everything You Need to Know?

It is good to research credit scores that are acceptable for loans. However, the reality is that there is not one single credit score acceptable in the UK. In this regard, you must know that your scores will be different based on the credit reference agency you use.

For this reason, understanding the average credit score is crucial. It can guide you at the time of making vital decisions regarding your finances. The reason why you must know your credit history is to evaluate the chances of getting approval from a lender.

Now, with favourable credit scores, you will have ample opportunities. This might not be possible when you are struggling with poor credit. You need to change your strategy to find an alternate lender.

Then, you should look for unsecured loans with a bad credit score. Your research can help you determine whether there are lenders who will be ready to help borrowers like you. Now, if you go ahead and apply for a random loan, you might have to go through rejection as well.

This is because not all lenders will be in a mood to accept a loan request from someone who has bad credit blots. Dig deeper to understand the average credit score and how it can impact your borrowing process.

Average credit score and things about it you must acknowledge

Based on some recent studies, the average credit score should not be an exact figure. Rather, this is going to be a range, as the ideal score for borrowing might vary. Now, if your credit scores fall within this range, you have a good chance of getting a breakthrough in loan approval.

In the UK, the range varies from 700 to 750. Referring to this range will help you get clarity as it will suit almost all the credit scoring models followed by different agencies like Experian, Equifax and TransUnion.

For easy understanding, it has been further narrowed down in the following manner.

800 to 1000 i.e. Excellent: This is the best scenario you can create for yourself when getting approval for loan applications is easy and 100% possible. The lender will see no risk in lending you money.

700 to 799 i.e. Good: This is also considered a positive score by lenders. If your score is between this range, getting loans at better rates will be effortless for you.

600 to 699 i.e. Fair: Having a score within this range will not bring you out of the race. However, things will become difficult from this point. You can get access to loans, but maybe at high interest rates.

400 to 599 i.e. Poor: You will start getting limited responses from the lender. Scores falling within this range are considered risky, and not many lenders will be interested in entertaining your loan request.

Factors that influence the credit scores

While studying various things about credit scores, pay attention to factors that affect them. Your score can vary based on them. You can focus on these aspects to understand credit history in totality.

1. Payment history

You cannot build credit scores without establishing a payment history. How can you do that? If you are using a credit card, the payments made for it can be used to create a payment history.

Now, the most important thing for you to note here is that timely payments are what can make a difference. You will have to work within a given timeframe. If you pay the credit card dues within the deadline, you will create a positive payment history.

This can even be done if you have taken out a loan. This is because, here also, you will be accountable to repay loans on time. Your payments will reflect on your credit records.

2. Credit utilisation

When you get access to credit cards, you will be assigned a credit limit. Now, ideally, you should not utilise credit up to the limit provided. The extent you will use out of the given limit will portray your credit utilisation.

For the safer side, this ratio should be below 30%. You must try to keep credit utilisation within this extent. This will be helpful in creating a positive credit history.

3. Duration of credit history

You might have a credit card account that is no longer in use. However, you should not think of closing it unless the balance is going negative. If it is a well-maintained account, you can reap its benefits.

You have been accessing it for a long time, and you can establish the longest credit history with that. This can have a positive impact on your credit scores. Always think twice before closing any account.

4. Mix of credit

The versatile credit options you deal with can give mileage to the positive growth of your credit scores. This will show how differently you can manage different accounts. For example, if you are handling payments of credit cards and loans at the same time, this is a credit mix opportunity.

By paying off the dues on time, you have shown that you are good at managing payments. This can leave a positive impression on the mind of the lender. They will not have any doubts regarding your financial capability.

5. Current credit applications

One of the biggest mistakes that many borrowers make is applying for multiple loans at the same time. This will make you go through hard inquiries on your credit profile. As a result of it, your credit scores will degrade.

Applying for multiple loans should not be mistaken for pre-approval. The latter is an opportunity designed by direct lenders to let borrowers understand the rates and terms before signing the loan agreement. This pre-approval facility does not require you to go through hard checks.

The bottom line

There are a few things you can do to improve your credit scores or keep them intact. You must always pay bills on time. Consistency in making payments can help you boost your credit score.

You must look forward to downsizing the pile of debts. Then, you will be able to free up money that can be used for your financial growth.