Debt Awareness Week: Supporting StepChange in Demystifying Credit Scores

Having greater financial confidence and an understanding of your credit score and history can inform the decisions you make and help improve your financial confidence and wellbeing. As a credit reference agency (CRA) we’re invested in helping consumers arrive at good outcomes and working with lenders and organisations to help make this happen.

This year, we’re supporting Leeds-based debt charity StepChange and their annual campaign, Debt Awareness Week 2024 to help open up the conversation around problem debt, and create visibility of the advice and solutions available to those who need help.

Debt Awareness Week is an annual event, and this year is themed around the ‘barriers to debt advice’. StepChange reports that half of their clients waited for over a year before seeking debt advice, and that 92% say they wish they had got help with their debt earlier. StepChange’s insight shows that there are a number of reasons why people delay getting help, but the impact this delay can have on finances and mental wellbeing can be devastating, and its essential people look to find support as early as possible.

One of the barriers cited by many people is a misconception that getting debt advice affects your credit score, or that it might limit their ability to access credit. Our role in helping individuals – from young adults onwards – to improve their financial confidence comes through providing accurate information on what a credit score is, how it works and what to do if you have any concerns.

There are three main CRAs in the UK; TransUnion, Equifax, and Experian, and each collect and store information to produce credit reports.

These businesses collect and hold information about a person’s credit history. When you apply for a financial product such as loan or mortgage you may see in the T&Cs that the provider shares data with a CRA. Information is shared with CRAs from different sources such as:

• Finance companies like banks, building societies, and insurers.
• Other bodies like local authorities and courts.

If you are over 18 years old and have a bank account or taken out a loan, credit card or mobile phone contract, then you will probably have a credit report.

Credit reports are used by companies for many reasons such as responsible lending, anti-money laundering and fraud prevention.

Regularly checking your credit report and keeping an eye on your financial health helps drive some of the decisions you make when applying for financial products, encourages better spending habits and – super usefully - alerts you to any issues that may be affecting you such as identity theft.

If you bank online it’s likely your provider will already provide useful tools or services to help monitor your credit score within their app or banking platform. Alternatively, sign up for a credit report or as a simple starting point a free Statutory Report from TransUnion – both are quick and easy to do.

Our own research indicates that 80% of UK consumers agreed monitoring their credit report is important, and 55% monitor it at least quarterly. Nearly half (48%) of the people we surveyed starting monitoring in the last two years – so if you’ve not started monitoring your score now is a great time to do so. A study carried out by TransUnion for clients that used a mixture of consumer research and credit data, discovered that credit monitoring enabled consumers to make positive changes and more likely to see a score change over nine months compared to the UK credit active population, suggesting monitoring can positively influence decisions and financial confidence.

A credit score is created using a set of rules which take information from your credit report. It can help finance providers assess your creditworthiness when they’re reviewing an application for finance. It’s important to note there are different types of credit scores which can be created by the credit reference agency, lender or other organisations providing credit.

Your credit report and score are used to help credit providers determine how much credit they’re able to extend. This helps ensure finance providers don’t lend more than you can afford to pay back. It helps protect you whilst enabling access to finance. However, this is just one of the factors used by the lender. A high credit score doesn’t mean you’ll be eligible for any product you apply for. Similarly, a low score doesn’t mean you cannot obtain credit. There are different products and finance providers to suit different needs.