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How to Clear Your Debts

Updated Information on the UK Credit Score Range

Scott Nelson MoneyNerd Janine Marsh MoneyNerd
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Scott
Scott Nelson MoneyNerd

Scott Nelson

Debt Expert

Scott Nelson is a renowned debt expert who supports people in debt with debt management and debt solution resources.

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&
Janine
Janine Marsh MoneyNerd

Janine Marsh

Financial Expert

Janine is a financial expert who supports individuals with debt management, cost-saving resources, and navigating parking tickets.

Learn more about Janine
· May 27th, 2024
Could you legally write off some debt? Answer below to get started.

Total amount of debt?

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

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uk credit score range

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Do you want to understand your credit score? We’re experts in this field. Every month, more than 170,000 people visit our website seeking advice on these topics.

In this article, we’ll explain:

  •  What a credit score is and why it’s important.
  •  How your credit score is worked out.
  •  Things that can help or harm your credit score.
  •  What a good credit score looks like in the UK.
  •  Ways to deal with debt you can’t afford.
  • Difference between Experian and Equifax, two big names in credit scores.

In 2022, arrears on household bills increased by 68% from £1,739 to £2,9201. So, it’s common for people to worry about debt and their credit scores.

If you find yourself in this situation, don’t worry. We’re here to guide you.

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

What’s Good Credit in the UK

There are two main credit scoring agencies in the UK. These are Equifax and Experian.

Each maintains a credit history for you and calculates a score. And each is used by a different set of lenders when making a search against your credit history. 

Experian and Equifax calculate and present your credit score slightly differently.

Below, the table shows the range of credit scores for each of these two agencies and the grade of credit scores across different ranges.

Credit Score Equifax Experian
Excellent 811-1000 961-999
Good 671-810 881-960
Fair 531-670 721-880
Poor <531 <721
Experian and Equifax are the two leading credit reference agencies in the UK.

What Is Considered a Bad Credit

The table above shows the different credit score ranges in the UK from both Equifax and Experian.

Now, it is easy to make the mistake of thinking the higher your credit score, the better your financial situation. However, the truth is a little more complex.

Just because your credit score is not in the top echelon does not mean you won’t be able to get credit.

At the high end of the scale, you may find that you are eligible for advanced financial products such as an unsecured line of credit. But the simple truth is most people don’t need or want these kinds of financial products.

Similarly, a lower credit score may impact not only your ability to get credit but also your employment in the UK.

For example, certain financial entities, like solicitors, are legally obligated to perform credit checks before employing someone. However, for the majority of other businesses, this is optional.

So, with this in mind, a good credit score is anything above the national average. At the time this post was published, this was around 760 with Experian.

In 2021, Equifax changed their scoring system, so it is difficult to estimate the national average accurately. However, it is likely somewhere between 531 and 670. If your credit score is on the right side of this average, you are in pretty good shape financially.

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

Get started

What is a Utilisation Ratio

Your credit score is also informed by your credit utilisation ratio. This refers to the percentage of your total available credit that you are currently using.

For example, let’s say I have a credit limit of £1,000 on my credit card, and I spend £700 during the month. This means I will have used 70% of the £1,000 available. Therefore, my credit utilisation ratio would be 70%.

Your credit utilisation ratio helps lenders determine whether you are a responsible borrower.

You’ll want to keep that number lower, as a high credit utilisation ratio could damage your credit score. But that’s not to say you shouldn’t use your credit card at all.

Having a 0% ratio suggests to lenders that you have no history of responsibly using credit.

Here’s how your credit utilisation ratio affects your credit score based on my experience:

  • Over 75%: Using more than 75% of your credit limit indicates a red flag on your credit report.
  • 50% to 75%: This is indicated by an amber flag. It could still affect your credit score, but it’s not as harmful as a red flag.
  • Under 30%: Using 30% or less of your available credit is considered a good strategy. This could improve your credit score.

How Is It Calculated?

In general, only the last 6 years of your credit history are used to calculate your credit score. Most unpaid debt is written off after 6 years.

Factors influencing credit scores can be positive or negative.

This means that there are things you can do to have a positive impact on your credit score. In the same breath, some actions you take can harm your credit score. Thus, your overall credit score is the sum of the impact of these events

Credit scores vary by the credit bureau (e.g. Equifax and Experian) since each company uses different algorithms to calculate your score. However, while the score may differ slightly, they all take into account similar factors.

Some of the factors that will affect your credit score include:

  • Your payment history: Pay your loans on time to improve your credit score.
  • Amount of debt: Reduce the amount of debt you owe.
  • Credit history: Use your credit accounts responsibly.
  • Types of credit used: Put some brakes on taking in more credit.

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Negative Things That Can Have An Impact

There is a wide range of things that can have a negative impact on your credit score, with the extent of the negative impact being derived from how serious the financial event was.

For example, being declared bankrupt would have a catastrophic impact on your credit score, while simply missing a credit card payment would have a much lesser impact.

We have listed some examples below.

  • Missing a credit card or loan repayments.
  • Applying for new credit.
  • “Hard” searches against your credit history. A hard search is when a lender pulls a detailed look at your credit history when you apply for a loan. Having too many hard searches in a short period suggests to lenders that you are reliant on credit or are experiencing financial difficulties. In contrast, a soft search is a quick view of your financial situation and therefore does not leave a mark on your credit report.
  • Defaulting on a debt with the debt being transferred to debt collectors for collection.
  • Using too much of your credit. Taking your credit cards to the max, for example.
  • Moving house.
  • Erroneous information on your credit report.

The effects of bad credit score can be far-reaching.

Not only will banks deny you credit, but a poor credit score can be the source of tremendous stress and debt-related health issues.

Make it a habit to regularly check your credit score and work diligently to dig yourself out of bad debt.

From personal experience, it pays to monitor your credit report.

You may find errors that could potentially harm your credit score – like when I discovered (and had it corrected) one car payment incorrectly reported as being paid late.

Debt Solutions Comparison

If you’re struggling with debt and have a bad credit score, it’s important to consider the different debt solutions available, as they can help you manage your finances effectively.

These are:

Debt Solution Description Formality Debt Type Debt Range Legally Binding Impact on Credit Score Asset Risk Monthly Payment Duration Creditor Agreement Required
Debt Management Plan (DMP) Agreement to pay back non-priority debts in one monthly payment. Informal Non-priority debts Any amount
No Yes No Varies Varies (until debt is paid) No (but creditors must be informed)
Individual Voluntary Arrangement (IVA) Agreement to pay back all or part of your debts over a set period. Formal All or part of debts Usually over £10,000 Yes Yes Possible Fixed Fixed period, usually 5-6 years Yes (75% by debt value must agree)
Debt Relief Order (DRO) Freezes debt for a year and be potentially written off. Formal Non-priority debts <£20,000 debt Yes Yes No None during freeze 12 months No (court approval needed)
Bankruptcy Legal status for those who cannot repay debts, potentially writes off debts. Formal Unmanageable debts Any amount, typically high debt Yes Yes High None during bankruptcy Usually 12 months, then discharge No (court process)
Consolidation Loan Taking out a new loan to pay off all existing debts. Multiple debts Based on loan amount Varies Yes Depends on loan type Fixed Depends on loan terms No
Payment Holiday Temporary relief or reduced payments offered by creditors.
short-term financial difficulties Any No Yes Low Reduced or paused payments Break of up to 6 or 12 months, depending on circumstances, payment history, and creditor’s policy. No
Informal Negotiation Direct negotiation with creditors for reduced payments or extended terms. All debts Any No Possible No Negotiable Until agreement terms are met No
Statutory Debt Repayment Plan (SDRP) Plan to repay debts over a reasonable time, with protections from creditor action. Formal All debts Varies Yes Yes No Fixed Varies, based on ability to pay Yes
Equity Release Homeowners release equity from their home to pay off debts.
Debts of homeowners, typically older individuals aged 55+ Varies and depends on property value Yes Yes Asset (home) is used as collateral Varies 8-10 weeks timeframe from application to fund disbursement. Lifetime; repaid on house sale/death. No

Things That Can Have a Positive Impact

Now, we need to look at all of the kinds of things that can have a positive impact on your credit score. Something we need to point out here, though, is it takes much longer to raise your credit score than it does to ruin it. One small mistake could take months to recover from. Here are some of the ways to improve your credit score.

  • Reducing your debt or having some of your debt written off.
  • Not utilising too much of your credit.
  • Keeping older credit agreements and accounts active.
  • Not missing payments.
  • Being registered to vote.
  • Staying at the same address for many years.
  • Having errors on your credit report corrected.
  • Use a credit building credit card.
Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

References

  1. StepChange Personal Debt Statistics in Scotland 2022
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The authors
Scott Nelson MoneyNerd
Author
Scott Nelson is a renowned debt expert who supports people in debt with debt management and debt solution resources.
Janine Marsh MoneyNerd
Debt Expert
Janine is a financial expert who supports individuals with debt management, cost-saving resources, and navigating parking tickets.