Your credit score plays a crucial role in your financial well-being, especially if you have existing debt. In the UK, lenders use credit scores to assess your creditworthiness, influencing your ability to borrow money, secure a mortgage, or even sign up for a mobile phone contract. If you’re managing debt, understanding how your credit score works can help you take steps to improve your financial position. 

What is a Credit Score? 

A credit score is a numerical representation of your credit history, calculated based on the information in your credit report. In the UK, three main credit reference agencies (CRAs) determine your score: 

  • Experian (0-999) 
  • Equifax (0-1000) 
  • TransUnion (0-710) 

Each agency may provide slightly different scores, as they use varying algorithms, but all of them reflect similar financial behaviours. 

How Debt Affects Your Credit Score 

Debt itself does not necessarily harm your credit score. However, how you manage your debt does. Here are key factors that can impact your score: 

  1. Payment History – Late or missed payments on credit cards, loans, or utility bills can negatively affect your score. 
  1. Credit Utilisation – Using too much of your available credit limit (e.g., maxing out credit cards) can indicate financial stress and lower your score. 
  1. Defaults and CCJs – If you fail to repay debts, creditors may issue a default or County Court Judgment (CCJ), both of which can significantly damage your score. 
  1. Debt-to-Income Ratio – Having too much debt compared to your income may make lenders cautious about offering you further credit. 
  1. Hard Searches – Multiple credit applications in a short period can make you appear desperate for credit, potentially lowering your score. 

Checking Your Credit Score for Free 

You can check your credit score for free using services such as: 

  • ClearScore (uses Equifax data) 
  • Credit Karma (uses TransUnion data) 
  • Experian’s Free Credit Score 
  • MoneySavingExpert’s Credit Club (uses Experian data) 

It’s essential to check your credit report regularly to spot any errors or signs of fraudulent activity. 

Tips for Improving Your Credit Score When You Have Debt 

  1. Make Payments on Time – Set up direct debits or reminders to avoid missing payments. 
  1. Reduce Credit Utilisation – Aim to use less than 30% of your available credit limit. 
  1. Clear Outstanding Defaults – If possible, settle or negotiate defaulted debts. 
  1. Avoid Multiple Credit Applications – Only apply for credit when necessary to prevent unnecessary hard searches. 
  1. Register on the Electoral Roll – Being registered at your current address can help boost your score. 
  1. Consider a Credit-Builder Product – Tools such as credit-builder credit cards or loans can help demonstrate responsible borrowing. 

Final Thoughts 

Your credit score isn’t set in stone – it changes based on your financial behaviour. Even if you have debt, taking proactive steps to manage repayments, reduce borrowing, and improve financial habits can gradually improve your score over time. Regularly reviewing your credit report and seeking professional advice when needed can help you stay in control of your financial future.