What Is a Bad Credit Score?

When you apply for a mortgage, the mortgage lender will look into your credit history to gain a better understanding of how you’ve managed your finances over the previous six years. Your credit score is a key indicator of this. The higher your score, the better chance you should have of securing the mortgage you need. 

In this article, you’ll find out what is considered to be a bad credit score and some of the steps you can take to improve this rating before applying for a mortgage.

What is a bad credit score?

There isn’t one universal score that is considered ‘bad’. That’s because the three main Credit Reference Agencies who compile information on your credit history: Equifax, Experian and TransUnion, all use different scoring systems.

A ‘Poor’ credit score with Equifax is between 280-379, and a ‘Very Poor’ credit score is under 279. TransUnion categorises a poor credit score as being between 551-565, and a ‘Very Poor’ rating is 0-550.  A very poor credit score with Experian is between 0-560, and a poor credit rating is between 561-720.

Is my credit score good or bad?

The best way to find out if your credit score is good or bad is to download your Credit Report and see for yourself. The report will include a score from each Credit Reference Agency on a scale that goes from ‘Very Poor’ to ‘Excellent’.

If you’ve had issues with bad credit in the past (like a missed or late payment), your score will probably be at the lower end of the scale.

How your credit score is categorised will depend on which credit reference agency you are checking with. Each agency categorises a good or bad score differently. The table below shows how these differ. 

It’s important to remember that credit scores aren’t fixed. They can change over time. There are many ways you can improve your credit score before submitting a mortgage application. 

What is the lowest credit score?

Zero! Most people with a zero credit score are people who haven’t built up any credit history at all during the past six years, which is the length of time your Credit Report will cover. There’s lots of legitimate reasons why you might not have a credit score. Maybe you haven’t opened any kind of credit account in your own name yet or you still live at home with your parents so you’re not included on any household bills. 

What is an average credit score in the UK?

There isn’t an average credit score in the UK, but there is an average credit category. Most people fall into the ‘Fair’ credit category, which is the credit equivalent of ‘average’. 

The average credit category for Equifax and Experian is the ‘Fair’ category. TransUnion's average credit score falls into the ‘Good’ category but it's very similar to other credit reference agency’s ‘Fair’ category. 

Equifax

The average Equifax credit score is 380 and this is in the ‘Fair’ credit category. With a credit score in the ‘Fair’ category, you can be offered reasonable interest rates but are likely to have a low credit limit.

Experian

The average Experian credit score is 759. The 759 credit score falls into the ‘Fair’ category. With this credit score, you can expect to be offered reasonable interest rates.  With a ‘Fair’ credit score, you will probably have a low credit limit. 

TransUnion

The maximum credit score possible with TransUnion is 710. The UK average credit score on TransUnion is estimated to be 610. The 610 credit score falls into the ‘Good’ category and means you’re likely to be approved for credit. With a 610 credit score, you might not necessarily get the best interest rates.

What is a good credit score?                            

A ‘Good’ credit score varies between each credit reference agency.

Equifax’s ‘Good’ category is a score of 420-465 and a score from 466-700 is ‘Excellent’. With a ‘Good’ credit score, you’re likely to be approved for credit but might not have the best interest rates. With an ‘Excellent’ credit score, you’re very likely to be approved for the most competitive mortgage rate offers.

The maximum credit score on TransUnion is 710, and a ‘Good’ score is between 604-627. An ‘Excellent’ score on TransUnion ranges between 628-710. Experian has the highest credit score range - up to 999. A ‘Good’ credit score on Experian ranges between 881-960 and an ‘Excellent’ score is 961-999.

Read more about this is in our Guide: What credit score do you need for a mortgage?

What is the best credit card for poor credit rating?

A credit card for bad credit can help you build your credit score. If you want to enhance your credit score and raise it from a ‘poor’ rating to ‘excellent’, there are credit cards designed to help you. Reputable mainstream lenders such as Virgin Money and Barclays offer credit cards for this purpose.

Even if you’re in the lowest credit score bracket, a credit card is a good place to start building up your reputation for credit reliability.

The best cards for bad credit are ones where you spend money up to a certain limit, and pay back what you borrow on time, just like normal credit cards. But the most suitable ones for bad credit have low credit limits and high interest rates. 

What causes a bad credit score? 

There’s lots of factors that could cause a bad credit rating, including:

• No credit history. If you don’t have a credit history, credit reference agencies will have no information to use to judge your creditworthiness. Younger people tend to have no credit history because their parents are usually financially supporting them.

• Failing to pay your credit agreements. Part of your creditworthiness is being seen as trustworthy. Making late payments, missing payments or paying less than required by your credit agreement will be added to your credit history. By being consistently unreliable with payments, your credit score will be classified as ‘Very poor’ or ‘Poor’.

• Declaring bankruptcy. Being declared bankrupt will stay on your credit report for six years. Bankruptcy means being unable to repay your outstanding debts and is a very severe form of bad credit.

• Choosing the wrong credit card. A credit card can either improve or ruin your credit rating, so you need to choose a credit card wisely. Choose a credit card which has a limited credit limit and interest rates that you can handle. 

• Getting a County Court Judgment (CCJ). A CCJ can be issued against you by a creditor for failing to pay them what you owe and, once registered, will stay on your credit file for six years. If you’re issued with a CCJ, try and repay the full amount within one month if possible. If you do, it won’t be registered on your credit file.

• Only paying the minimum every month. Avoid paying off the bare minimum when it comes to your credit card. Paying more than the minimum means you will spend less on interest and can improve your credit score.

• Identity theft. Make sure to protect your credit card against fraud. You can make your credit card extra secure by setting up an email or text alert which is triggered every time a transaction takes place. Fraudsters don’t care about your perfect credit rating and will run up huge bills and damage your credit score.

• Using an Individual Voluntary Arrangement (IVA). An IVA is a repayment agreement made between a borrower and lender when they are unable to pay their debts. IVAs are also kept on the Individual Insolvency Register. A creditor will most likely check this register as it’s in the public domain.

What causes a good credit score?

As much as there’s ways to get a bad credit score there’s also things you can do to get a good credit score, such as:

• Paying your bills on time. Payment history is the most important factor when making up your credit score. Paying your bills on time every month is crucial to having a good credit rating. A way to make sure your bills are paid on time is by setting up a direct debit. Once you set up a direct debit, you don’t have to worry about remembering to pay the bill.

• Making sure your personal details are correct. Mistakes happen and you can end up with inaccurate information on your credit file. We recommend using Checkmyfile** to get a thorough look at your credit history so you can see what information is held about you, and if all that information is correct. Our guide, Checkmyfile Explained, outlines all the benefits of using this service.

**When you click through to our affiliate links, we may earn a small commission at no extra cost to you. We only recommend sites we trust and believe in.

• Limit new credit requests. Limiting the number of times you ask for new credit will reduce the number of hard inquiries into your credit file. Hard inquiries stay on your credit report for two years but their impact on your credit score reduces over time.

• Living at the same address. Lenders often prefer it if they can see you’ve lived at one address for an extended amount of time. So if you’re planning on applying for a mortgage, consider how long you’ve lived at your current address. Or maybe plan to stay in one address for a few years before you apply. 

• Not using all the credit available to you. Using your credit sparingly causes good credit. Credit utilisation is essentially how much of your available credit limit you use. For example, if you have a credit limit of £3,000 and you’ve used £1,500 of that, your credit utilisation is 50%. Using your credit limit responsibly looks good to lenders.

How does a credit score affect your mortgage?

When you apply for a mortgage, the lender checks your credit history to make a decision. Your mortgage application is more likely to be successful if you have a good credit score. A bad credit score means less lenders will be willing to lend to you. 

Your credit score and history will affect your monthly mortgage repayments. Generally, the poorer your credit score, the higher your interest rate will be. Or, a lender will ask you to put down a higher deposit.

If you have a low credit score, it’s a great idea to work with an experienced mortgage broker (like us!) because they have access to specialist bad credit mortgage lenders who will look more favourably on these types of applications and have a strong track record of helping people with bad credit secure the mortgage they need.

Does a bad credit score mean you can’t get a mortgage?

No, not necessarily. A lower credit score can make things harder, but it doesn’t make homeownership impossible. It’s likely that most mainstream mortgage lenders won’t want to lend to you if you have a ‘Poor’ or ‘Very Poor’ rating, but there’s still several lenders available who will. 

It might mean you have to pay a higher interest rate and require a higher deposit. It really depends on the type of bad credit issue you’ve had, when it happened and how much it was for.

This is where working with an experienced mortgage broker really make a difference. They’ll be able to identify the right mortgage lenders who have a track record of helping people in a similar situation and can advise you on how to prepare your mortgage application so you’ll have a better chance of success.