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Why do I have a bad credit score?

Get to grips with why you might have a bad credit rating and what to do if a lender rejects your application because of a poor or low credit score.

In this article
Coronavirus (COVID-19) credit score update  What is a bad credit score? Why might I have a bad credit score?
Coronavirus: will deferring my payments affect my credit score?  Why can having no debt could give me a bad credit score? What should I do if I'm refused credit?

Coronavirus (COVID-19) credit score update 

Credit reference agencies have promised credit scores will not be affected where people take mortgage payment holidays during the coronavirus outbreak. 

You can find more of the latest updates and advice related to the COVID-19 outbreak over on our dedicated Which? coronavirus information hub.

What is a bad credit score?

Nobody has a single credit 'score' or 'rating' that lenders will use when deciding whether or not to accept you as a customer.

Neither is there such thing as a 'credit blacklist.' Instead, each lender you apply to will carry out its own assessment to determine whether or not to offer you credit.

However, having a blemished credit history will make it more likely that you are turned down when you apply to borrow money.


Why might I have a bad credit score?

If you fail to stick to the terms of your original credit agreement, information about this will appear on your credit report.

For example, making credit card or loan repayments late, or missing them altogether, will impede your ability to borrow in future.

Likewise, being declared bankrupt, entering into an Individual Voluntary Arrangement (IVA) or having a County Court Judgement (CCJ) made against you will badly affect your creditworthiness.

Even making just the minimum repayment on your credit card each month can have an adverse effect on your credit report, as it may lead lenders to assume you are struggling to clear your debts.

If you are in financial difficulty and your debts are no longer manageable, it's important to contact your lenders as soon as possible to inform them and ask for help.

It's better for you to be upfront with the facts than to repeatedly miss loan or credit card repayments with no explanation.

Find out more: How to deal with debt

Coronavirus: will deferring my payments affect my credit score? 

On 31 March, the credit reference agencies Experian, Equifax and TransUnion confirmed that homeowners will have their credit scores protected when they take out a mortgage payment holiday. 

The agencies have collectively introduced a special measure called an ’emergency payment freeze’. This will mean credit scores will be maintained at their current level for the duration of the payment holiday.

This formal announcement follows guidance from the trade body UK Finance earlier in March, which stated mortgage providers must ‘make every effort’ to ensure payment holidays don’t damage credit files.

Why can having no debt could give me a bad credit score?

If you have never borrowed money, you might assume this means you have a good credit score. In fact, this is unlikely to be true.

That's because when assessing your application, lenders look for evidence that you'll be able to pay back what you borrow, so having no record of successful repayments can count against you. 

Consequently, you may find you are turned down for market-leading credit cards and loans even if you could comfortably afford to pay them back.

Find out more: Compare credit builder credit cards

What should I do if I'm refused credit?

If you're refused credit, you don't have a legal right to be told why.

If a rejection is based on information obtained from a credit reference agency, the creditor must simply tell the borrower that this is the case, and provide details of the agency concerned.

They are not obliged to offer any further information, but it is always worth asking.

If you feel you've been turned down for credit unfairly, you can appeal and supply further information to support your application.

If the decision not to lend to you was made by an automated system, you can ask for this to be reviewed.

Should you still find yourself unable to get the credit you originally applied for, it’s important not to apply for another credit card or loan immediately as this could cause you further problems.

Instead, you should check your credit report and take steps to improve your credit rating before trying to borrow from another lender.