Future you will thank you: Everything you need to know about credit scores

If you're 17 or about to turn 18, you'll probably start hearing about credit scores. A credit score shows how you've handled borrowing money, and the choices you make now can affect opportunities later on.

What is credit? 

Credit is when you borrow money now and pay it back later.

Everyday examples include:

• Using a credit card.
• Clicking ‘buy now, pay later’ at checkout.
• Paying for a phone contract each month.
• Using an overdraft in your bank account.

If you’re not paying for something fully and immediately, you’re probably using credit.

What’s a credit score?

A credit score is a number that shows how reliable you are at borrowing and paying money back. It’s based on your financial history and other information such as:

• Whether you’ve borrowed before.
• Whether you pay it back on time.
• How you manage credit day to day.
• If you’re registered on the electoral roll.

Credit references agencies like Experian, Equifax, and TransUnion collect this information to help calculate your score. Each agency calculates it slightly differently, so there’s isn’t just one universal score.  

When do you get a credit score?

You usually start building your credit score when you turn 18. Before that credit reference agencies don’t normally collect any information about you, so you won’t have a credit history yet.

Once you do start using credit, it can take 3-6 months for a credit score to appear. For example, if you take out a student loan or a mobile phone contract.

So at the start, your credit file might be described as “thin”, simply because there isn’t much information yet. That’s normal.  

Why does a credit score matter?

Credit scores help lenders decide whether to offer you credit. They can also affect how easy it is to rent a flat, get a phone contract, take out a loan or apply for a mortgage.

A poor or limited credit history can mean higher interest rates, being declined, or needing a guarantor. 

Different agencies calculate credit scores slightly differently, but ultimately they’ll all give you a number within a range – a higher score suggests you handle money well, and a lower score suggests you haven’t. 

Over time, your credit score can affect how easy it is to:

• Rent a flat.
• Get a phone contract.
• Be accepted for a credit card or loan.
• Get a mortgage later in life.

A poor or misisng credit score can mean higher interest rates, being declined, or needing a guarantor (someone who legally agrees to pay if you don’t).

Is credit bad?

Credit isn't bad. Used responsibly, it can help you build a positive credit history. The key is only borrowing what you can afford to repay and making payments on time.  

Good habits to build early

A few simple habits can make a big difference:

• Only borrow what you can afford to repay.
• Always pay on time.
• Keep track of what you owe, especially subscriptions and buy-now-pay-later.
• Read what you’re agreeing to.
• Check your credit score, but avoid applying for lots of credit at once.

Small, repeated decisions now help keep more options open later.