The UK economy is facing another period of uncertainty. Inflation, which had been steadily falling, has recently risen again to 3.7%, with services inflation climbing to 4.8%. At the same time, the Bank of England has cut its base rate to 4%, but further cuts now look less likely as policymakers weigh the risk of inflation staying higher for longer.
So what does this mean for borrowers — and how do your credit score and credit file come into play?
What's Included?
🔺 The Cost of Borrowing in 2025
Even though interest rates are lower than they were a year ago, the recent rebound in inflation means the cost of borrowing may not fall as quickly as many had hoped. Lenders are cautious, and affordability checks remain strict.
For consumers, this means:
- Credit cards and loans may still carry higher-than-expected interest rates.
- Car finance and mortgages could remain harder to access for those with weaker credit profiles.
- Lenders will look more closely at your credit file before approving new borrowing.
📊 Why Your Credit Score Matters More Than Ever
In times of economic uncertainty, lenders become more selective. A strong credit score can help you:
- Access lower rates: Lenders are more likely to offer competitive APRs to applicants with higher scores.
- Improve approval chances: A positive credit history reassures lenders that you’re a lower-risk borrower.
- Increase flexibility: With a stronger score, you may have a wider choice of lenders and products.
On the other hand, a weak score may limit your options and mean paying significantly more in interest.
🔍 How Your Credit File Is Used
Your credit file is central to how lenders decide whether to approve you. They’ll assess:
- Payment history – missed or late payments can harm your score.
- Credit utilisation – using a high percentage of your available credit may raise concerns.
- Existing commitments – too many active loans or high monthly repayments may reduce affordability.
- Recent applications – multiple credit applications in a short space of time can negatively impact your score.
💡 Steps to Protect Your Credit Health in 2025
Here are some practical tips to strengthen your credit profile and manage borrowing in today’s climate:
- Check your credit file regularly – Make sure all information is accurate and up to date.
- Pay bills on time – Even one missed payment can lower your score and stay on your file for years.
- Keep balances low – Aim to use less than 30% of your available credit.
- Avoid unnecessary applications – Use soft search tools before applying for new credit.
- Report positive behaviours – Services like rent reporting and subscription reporting can help build your history.
✅ Final Thoughts
With inflation climbing again and interest rate cuts now uncertain, it’s more important than ever to stay on top of your credit score and file. Borrowing costs will remain competitive for those with strong credit profiles, while weaker scores could mean higher costs or reduced access.
Monitoring your credit file through free services like Credit-Score.co.uk can help you understand your current position, spot areas for improvement, and make sure you’re prepared when applying for new credit.
In 2025, knowledge really is power — and your credit score is your strongest financial asset.
