How credit scores impact borrowing in the UK

The state of credit and why your score matters

Credit scores influence almost every borrowing decision in the UK, from the interest rate on a credit card to whether a mortgage offer lands at all. In early 2025, outstanding UK credit card debt topped £70bn, sitting above pre-pandemic levels, while half of new cards issued in March arrived with promotional terms. That combination tells a clear story. Shoppers are leaning on unsecured credit to manage the cost of living, and lenders are competing hard for business with headline offers. Your score is the filter through which those offers are priced and approved.

Mortgage activity offers another signal. Bank of England data shows approvals for house purchases rose to 63,000 in May 2025, with remortgaging approvals up to 41,500. Improving confidence and easier access to secured credit are good news, but access is not evenly distributed. Regions flagged in the Good Credit Index as credit deserts, including parts of Yorkshire, Greater Manchester and Merseyside, face thinner options and tighter outcomes. In these places, a strong score can be the difference between a workable rate and a rejection.

There is also cooling in unsecured borrowing to note. Net consumer credit borrowing fell to £0.9bn in May 2025, down from £1.9bn the month before, with credit card borrowing dropping sharply. When demand softens, lenders often refine risk models and tighten terms. That can widen the gap between outcomes for those with strong credit files and those without.

Experian’s 2025 smarter credit score reflects a broader shift in how creditworthiness is assessed. Lenders increasingly use more granular data and analytics, providing fairer assessments for many applicants without necessarily changing eligibility overnight. It rewards consistency, timely payments and manageable utilisation, not just a single number in isolation.

Total UK personal debt reached around £1.9 trillion by March 2025. In that context, understanding your score is not academic. It is about real money over time. A percentage point saved on a mortgage or a lower APR on a credit card can translate to hundreds or thousands of pounds kept in your pocket.

Kandoo, a UK-based retail finance broker, sees these trends first-hand. The practical takeaway is straightforward. Know your score, know how lenders read it, and act deliberately to improve it. When you do, the market tends to meet you halfway with better rates, fewer fees and smoother approvals.

Understanding APR is not just a percentage. It is a price tag on your borrowing life.

Small improvements, applied consistently, compound into large savings over time.

Who benefits from this guide

If you are considering a mortgage in the next 12 months, planning a remortgage, evaluating a balance transfer, or applying for a personal loan, this guide is written for you. It is equally relevant if you live in regions with thinner credit access where lenders scrutinise files more closely. Perhaps your credit score is solid but not stellar, or you have had missed payments in the past and want to rebuild. You may simply want to understand why two people with similar incomes get very different rates. We cover what drives a UK credit score, how 2025 market shifts affect approvals and costs, and the steps to take today so your next application lands on the right side of a lender’s risk curve.

Key terms decoded

• Credit score: A numerical summary of credit risk based on your history across accounts, payments and utilisation. UK bureaus use their own scales, but directionally higher is better.

• Credit report: The underlying data lenders review, including accounts, limits, balances, repayment history, defaults, CCJs and searches.

• APR: The annual percentage rate that combines interest and standard fees to show the cost of borrowing each year.

• Utilisation: The share of your available credit you are using. Lower utilisation typically signals lower risk to lenders.

• Hard search: A lender check recorded on your file during an application that can temporarily nudge your score down.

• Soft search: A quotation or eligibility check that does not affect your score and is only visible to you.

• Promotional terms: Introductory deals, such as 0 percent purchase or balance transfer periods, common on new credit cards in 2025.

• Affordability: A lender’s view of whether repayments fit your income and essential outgoings under current and stressed rates.

• Thin file: A limited credit history that can make scoring and pricing less favourable despite no adverse events.

Your borrowing routes today

1. Credit cards with promos Promotional cards are abundant in 2025, with around half of new cards in March issued on special terms. They can cut costs for purchases or transfers, but you must plan for the revert rate and avoid creeping balances.

2. Personal loans Fixed-rate instalment loans suit larger, time-bound purchases. A stronger score often brings lower APRs and larger eligible amounts. Expect tougher terms if unsecured borrowing demand continues to cool.

3. Overdrafts Flexible but typically expensive for revolving use. Good for short, controlled cash flow gaps if repaid quickly. Heavy or prolonged use can signal risk to lenders and weaken future applications.

4. Mortgages and remortgages With approvals rising in May 2025, applicants with stable profiles can benefit from improving choice. Your score, LTV and income stability determine rate tiers and product availability.

5. Retail finance and point-of-sale credit Often interest-free if repaid within the promotional window. Useful for budgeting with fixed payments. Missed deadlines can trigger high revert costs.

6. Credit builder products Secured cards or builder loans help thin or impaired files. The goal is steady, on-time payments and low utilisation to establish track record.

What it could cost and why it matters

Who lenders are likely to approve

Lenders model risk across your whole profile. A strong case pairs a clean payment history with predictable income, modest existing commitments and a stable address footprint. In the current market, two trends shape outcomes. First, cost-of-living pressures mean higher baseline balances, especially on cards, making affordability tests stricter. Second, even as mortgage approvals have nudged up, unsecured demand cooled in May 2025, prompting some providers to refine criteria. Your credit score remains central, but today’s smarter scoring looks deeper at patterns. Consistent on-time payments, low utilisation, and sensible credit seeking can offset a thin file. Conversely, clusters of recent hard searches, high utilisation and overdraft dependence can cap limits or lift rates. Regional disparities matter too. In areas identified as credit deserts, the bar for acceptable risk may be higher due to local performance data. Prepare by strengthening the controllable factors on your file before applying and by using soft-search eligibility tools to target products that fit your profile.

From check to approval in simple steps

1. Get your full statutory credit report from all bureaus.

2. Correct errors and add a short explanation where appropriate.

3. Register on the electoral roll at your current address.

4. Reduce utilisation by paying down revolving balances first.

5. Set up direct debits to protect every repayment date.

6. Use soft-search tools to find realistic product matches.

7. Time applications to avoid multiple hard searches close together.

8. Keep evidence ready: payslips, bank statements, ID, and proofs.

Balancing the upsides and trade offs

Red flags and common pitfalls

Be wary of treating promotional limits as free money. In March 2025, promotional cards peaked, but overspending during the intro period is a common reason balances become expensive later. If your utilisation rises above 30 percent and stays there, your score can soften even with timely payments. Avoid back-to-back applications that create clusters of hard searches. Lenders notice. Watch overdraft reliance as well. It can signal stress even if you pay fees on time. If you live in an area with thinner credit access, expect closer scrutiny of affordability and consider building additional months of clean history before applying. Finally, remember that the UK’s total personal debt sits near £1.9 trillion. In a high-debt environment, lenders price risk carefully and small profile improvements can materially change outcomes.

If credit is not the answer

1. Build a cash buffer Even a modest emergency fund cuts reliance on cards and overdrafts.

2. Speak to creditors early Payment plans or temporarily reduced payments can prevent negative marks.

3. Consider debt advice UK charities can help prioritise debts and manage creditors when budgets are tight.

4. Explore balance transfer alternatives A lower-rate personal loan can replace multiple high APR card balances.

5. Increase income or reduce fixed costs Side income or switching utilities can stabilise affordability quickly.

Quick answers to common questions

Q: How much does utilisation affect my score? A: It is a major factor. Keeping card balances below 30 percent of limits typically supports stronger outcomes. Paying mid-cycle can help.

Q: Do soft searches affect my applications? A: No. Soft searches are not visible to lenders. Use them to compare eligibility without denting your score.

Q: Are promotional credit cards safe to use? A: Yes, if you plan repayments and clear balances before the promo ends. Set reminders and watch for transfer fees and revert APRs.

Q: Why did my mortgage offer change after an Agreement in Principle? A: Underwriting checks more detail, including bank statements and debts. Shifts in income, credit use or market rates can alter final pricing.

Q: Can I rebuild after missed payments? A: Yes. Six years is the visibility window, but consistent on-time payments, lower utilisation and limited new applications can lift scores sooner.

Q: Does where I live affect approval odds? A: Indirectly. Lenders use performance data that can reflect regional risk, and access is thinner in some areas. Strengthen controllable factors to offset.

Move forward with confidence

Start by auditing your reports across the main UK bureaus, then eliminate errors and set automatic payments to protect your record. Trim utilisation on revolving accounts and use soft-search tools to target products that suit your profile. If you are preparing for a mortgage, give yourself extra time to season your file. When you align score, affordability and timing, you give lenders fewer reasons to hold back.

Important information

This guide provides general information, not personal advice. Borrowing always carries risk. Check eligibility using soft searches where possible and consider independent guidance if you are unsure. Lenders’ criteria and rates change frequently in response to market conditions.