Experian, the largest of the three main UK credit reference agencies, has rolled out a subtle but significant update to its scoring algorithm this month. Millions of consumers logging in to check their files may notice their score has shifted, even if their financial behaviour has not changed.
While the fundamental rules of credit scoring remain the same, the weighting applied to certain behaviours has been adjusted to better reflect the current economic climate.
The Winners: Long-term stability rewarded
The new algorithm places a slightly heavier emphasis on the average age of your credit accounts. Consumers who have held the same bank account and credit cards for many years without missing payments will see a slight bump in their score.
Lenders view long-term stability as a strong indicator of reliability, especially during periods of economic volatility. If you were considering closing an old, unused credit card, you should reconsider — keeping it open (with a zero balance) now benefits your score more than it did previously.
The Losers: High utilisation penalised faster
The most significant change affects credit utilisation. Previously, keeping your balance below 30% of your total limit was the gold standard, and that remains true. However, the penalty for creeping above 50% utilisation is now applied more sharply.
Consumers who are maxing out their cards or relying heavily on overdrafts will see their scores drop faster under the new algorithm. Experian's data suggests that high utilisation is currently the strongest leading indicator of future default.
What you should do
Do not panic if your score has dropped by 10 or 20 points — minor fluctuations are normal during an algorithm update. However, if you are planning a major application like a mortgage in the next six months, you should take immediate action to optimise your file.
Pay down your credit card balances before your statement date, ensure you are on the electoral roll, and check your report for any administrative errors that the new algorithm might be penalising more heavily.