What actually affects your credit score

Credit scoring is opaque by design, which has produced an enormous quantity of folklore, most of which is wrong.

What lenders actually look at

The factors that dominate, broadly consistent across scoring systems.

Payment history, which is the largest single factor.

Missed and late payments, defaults, county court judgments or equivalents, and insolvency all have substantial effects, and recent problems matter more than old ones.

Credit utilisation — how much of your available credit you are using.

Lower is better, with figures below around thirty per cent commonly cited and lower still being better.

This updates monthly and is one of the fastest levers available.

Length of credit history, where longer is better, which is why closing an old account can be counterproductive.

Recent applications, since several hard searches in a short period suggest difficulty.

Credit mix, which has a modest effect.

And public record information including insolvency and judgments.

What does not affect it

Where the folklore is wrong.

Your income, which lenders consider separately and which is not on your credit file.

Your savings or investments.

Checking your own credit report, which is a soft search and has no effect — this myth prevents people from doing the single most useful thing.

Your partner's credit history, unless you have a joint account or a financial association with them, which does link files.

Your address in itself, though electoral registration at your address does matter in some jurisdictions.

Debit card use and current account balances in most systems.

Council tax, in most systems, though this varies.

And declined applications in themselves, though the search left behind is visible.

The score versus the report

An important distinction.

There is no single universal credit score — different agencies use different models, and lenders use their own scorecards combining your file with their own criteria and their current appetite.

Which means the number a consumer service shows you is indicative rather than the figure any lender sees.

What matters is the underlying report: the accounts, the payment records, the searches and any adverse information.

Checking the report and correcting errors is considerably more useful than watching a score.

Checking and correcting

Which everyone should do.

You are entitled to see your credit file, free in most jurisdictions, from each agency — and files differ between agencies, so checking all of them matters.

Look for: accounts you do not recognise, which may indicate fraud; incorrect payment markers; debts that should have dropped off after the retention period; incorrect personal details; financial associations with former partners that should be severed; and defaults recorded incorrectly.

Errors are corrected by disputing with the agency, which must investigate, and with the lender directly.

You can add a notice of correction explaining circumstances behind adverse information, which lenders assessing manually will see.

Building or rebuilding

Practical measures.

Register on the electoral roll where this is used, which is quick and has a measurable effect.

Pay everything on time, every time, since payment history dominates.

Set up direct debits for at least the minimum on everything.

Keep utilisation low, which may mean paying a card off before the statement date rather than only before the due date.

Keep old accounts open where there is no cost to doing so.

Space out applications.

Use eligibility checkers, which use soft searches, before applying.

And for those with no history, credit-builder products and being an authorised user on someone else's account can establish a record — with credit-builder cards carrying high rates that make them expensive if a balance is carried.

How long problems last

Retention periods vary by jurisdiction and are typically several years.

Defaults, judgments and insolvency records drop off after a defined period, and their impact reduces before that as they age.

Which means recovery is a matter of time plus consistent behaviour rather than of any product that promises repair.

Companies offering to remove accurate adverse information cannot do so, and anyone claiming otherwise is selling something that does not exist.

Where it matters and where it does not

Worth keeping in proportion.

It matters for mortgages, loans, credit cards, car finance, mobile contracts and, in some jurisdictions, insurance pricing and rental applications.

It does not determine whether you are a good person or a competent one.

And a person with no debt and no credit history has a thin file, which is a lending problem rather than a financial one, and is worth addressing before you need a mortgage rather than at the point of applying.

General information only, not financial advice. Credit systems vary by country — check your own credit reports, which is free and has no effect on your score.