Credit Scores, how they work and how to improve yours

A brief look into how credit scores work and why you maybe can’t get credit and didn’t realise.

Hello everyone and welcome back for another Bywater blog post.

This time I will be addressing something that is asked every single day without fail and that is Credit Scores.

The issue we have with credit scores in the UK is that the majority of people do not understand them. We don’t have them explained to us, they all work slightly different and it’s a mine field with very little info available if you’re trying to figure it out. With that said hopefully this post can serve as some assistance.

I’d like to start by saying that I am not trained in credit scoring nor have I ever worked for a credit scoring agency. The reason I decided to write this post is due to past issues myself I have spent years reading up on and speaking to the reference agency in in order to gain an understanding of how it all works and what can be done if it all goes Pete Tong.

I get calls/Texts/Emails everyday from people telling me their credit rating is poor but can they still have finance. The majority of the time the short answer is no, but who am I helping if I just tell them no and off they go?

I try to use my experience and research to help people so that going forwards they can work to fix whatever issues they may have and build a better future for themselves, I’m not just talking car finance either.

How Does Credit Scoring Work?

First of all, how does a credit score work? Well it’s important to understand that there is actually no such thing as a credit score. When a potential lender looks into your history/current situation they don’t see that you are an 899 and this is a “good score”. What they see is everything. They can check your address and address history, employment status, annual income, credit history, financial ties, EVERYTHING. The credit score is what the reference agency give you to give you an idea of what they think lenders might think of you when they do their checks.

If a lender checks your history and it will tell them you’re a home owner and have been for 10 years. No dependants, been employed with the same company for 7 years. On a good wage with a mortgage, car finance and 2 credit cards but 6 months ago you missed 2 payments on your mobile phone, they will still see this as credit worthy and approve your finance. A credit reference agency knows this so they give you a representative score to help you understand how credit worthy you may seem to lenders. A score based on the above scenario will probably be 899 out of 999 and Good.

If we take another scenario but this time you are renting your house and have only lived there 6 months, work part time at a new job with 3 dependants and have missed 6 out of 12 payments on your maxed out credit card. Potential lenders will most likely reject this and the reference agencies know this so they would give you a representative score of let’s say 425 out of 999 which will fall into the poor category.

Who Are These Credit Reference Agencies?

Ok so let’s move on a little bit. There are 3 main credit reference agencies in the UK. Experian, Equifax and Call Credit. Lenders will usually have a favourite that they work with but can use all 3 and all lenders use different ones so it’s important to make sure your information is uniformed across all 3. If you move house you can’t just update Experian as if you apply for credit with a company who use Equifax it will show up incorrect and can cause you to automatically decline.

It is important to make sure that when you apply for finance all of your information is correct, you cannot lie about anything as they know and you will be rejected for lying. You cannot tell them you earn £35,000 a year of the truth is £30,000. Honesty really is the best policy.

I do deal with customers everyday who lie on their application because they think we’re the ones making a decision. I regularly get told by people that they have good credit and have never had an issue only to find out 2 hours later they have 7 CCJ’s and have been rejected 9 times in the past week by finance companies.

How Do I Fix My Credit Report?

Let’s get down to the part I think most people will be reading this post for. How to fix your report or what to do to improve it if you’ve just learned your score isn’t great.

The first and most important thing to do is don’t ignore it and hope it will be right if you leave it 6 months. Chances are it won’t be but that does seem to be the go to plan for most people I speak to.

You need to get onto one of the reference agencies straight away and pay for you report. NOT A FREE SCORE! Your actual report as this is where you will find the majority of information held on you.

You report is where you will find any issues or what it is that the lender doesn’t like. I will point out here that you need to start by making sure it fully up to date. If you haven’t updated your most recent address then your report won’t show you anything relating to that address so you won’t be able to see your entire report.

The home page of your credit report will look like the image below. Click on where it says negative factors and see what it says. This could be your biggest clue but not always. If this says your largest credit amount is very high for example, then it may simply be that you’ve been declined as they believe you’re unable to afford to borrow any more money. This is also a very common occurrence especially it you’ve been rejected but have a genuinely good score/report.

If the “negative factors” (4) don’t tell you what the issue is or you believe there may be more to it then you need to click on your actual report which will look like the image below.

Above you will see an example of one account as it will show on your report. In the middle is says account status and next to it there are green boxes with 0’s in them. This indicates that there are no missed or late payments on this account. If you do have any missed/late payments there will be numbers in the boxes and the colours change from green to yellow then orange then red depending how my you have missed. Once you have missed 5 or 6 payment they lender can Default your account which has a huge negative impact on your ability to lend money and stays on your account for 6 years.

At the top of the image it shows all of your information relating to that account. If it show the status as “Default” then you need to contact that company and find out what has happened and why your account is in default. sometimes it can be a misunderstanding or an issue at their end.

Defaults and CCJ’s.

So what happens if you find yourself in a situation where you have a default on an account or a CCJ (County Court Judgement). Speak to the company who have issued the default/CCJ and find out why you’ve been given it.

If it is on your account in error you can speak to them about having it removed. If you’ve not been making payments to that lender then unfortunately this is the result of that and there isn’t really anything you can do but wait it out for 6 years.

You cannot have a default removed unless it was put on your file as a genuine mistake/misunderstanding. 

A CCJ can be removed from your account but you have to speak to the company who placed it there and ask if there is a way you can agree to have it removed. If they agree to remove it you must then go to the Court who issues the judgement and get a form to file for it removing. There is a cost to this of a few hundred pounds. The court will take the form and speak to the company.

If the company agree for it to be removed then the court will remove it, however if the company reject your application you will have to start again from scratch or just accept that it’s on your report for 6 years.

Can I borrow money with a Default or CCJ?

The good news is yes, sometimes you can. The bad news is you will most likely pay high levels of interest and/or have to secure your loan against something, most commonly a house or vehicle.

There are plenty of credit card companies who will give you a credit rebuilder card. These usually have a small available balance of a few hundred pounds and higher APR’s than what’s normal but they a good idea to have one. If you get one just be sensible with it. Use it to pay for something small like fuel for your car then each month pay it off in full. This will good on your credit report and help to build you back up.

There are even banks out there now who will approve you for a mortgage with Defaults or CCJ’s if they believe you to be credit worthy. Say you have a negative history from 3 years ago but since then have paid everything in full and on time, They will take it into consideration and you may be approved.


To wrap this up, if you have had credit declined, get a full report and try to pinpoint why. Speak to the lender who has negatively impacted you and see if there is anything that can be done about it. If nothing can be done then manage your money carefully making sure it doesn’t happen again. 

Do not bury your head in the sand hoping “it’ll be right!” it won’t. Hiding from it means you don’t know what is happening with your finances going forwards and this leaves you wide open to repeat the same mistake again and again.

If there is anything you are still unclear of when it comes to your credit score and potentially financing/leasing your next car, please do give me a call and I will be happy to discuss your situation and options with you.

Thank you for reading. Please leave us a comment if you found this helpful or have any questions.



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