Your credit score is a crucial component of your financial health. It determines your ability to borrow money, get approved for credit cards, rent a property and even get a mobile phone contract. A good credit score can help you get better rates on loans and credit cards, while a poor credit score can limit your options and lead to higher interest rates.

If you’re looking to build your credit score in the UK, there are several steps you can take to improve your creditworthiness. In this blog, we’ll cover some key tips on how to build your credit score in the UK.

 

  • Check your credit report

 

The first step in building your credit score is to check your credit report. Your credit report contains information about your credit history, including any outstanding debts, missed payments and bankruptcies.

You can get a free statutory credit report from each of the three credit reference agencies in the UK: Equifax, Experian and TransUnion but it is quite basic.  They also offer a free trial period to use their more detailed reporting services.  Review your report carefully and dispute any errors or inaccuracies.

You can obtain more in-depth credit reports from each of the three main credit reference agencies through Clear Score, Totally Money and Credit Karma.

Checkmyfile offers a monthly subscription service.  They use data from all three credit reference agencies to produce their own credit reports plus lots of other useful information.   They offer a free trial period too.

 

 

  • Pay your bills on time

 

One of the most important factors in your credit score is your payment history. Paying your bills on time is crucial to building a good credit score. Late payments can stay on your credit report for up to six years and can negatively impact your credit score.

Set up automatic payments or reminders to ensure that you never miss a payment. Even if you can only make the minimum payment, it’s better than missing a payment altogether.

 

  • Use credit responsibly

 

Using credit responsibly is key to building a good credit score. This means only borrowing what you can afford to repay and not maxing out your credit cards.

A good rule of thumb is to keep your credit utilisation ratio below 30%. This means that you’re only using 30% or less of your available credit. If you have a credit limit of £1,000, for example, you should aim to keep your balance below £300.

 

 

  • Apply for credit in moderation

 

Applying for credit too often can have a negative impact on your credit score. Every time you apply for credit, it leaves a footprint on your credit report. If you apply for multiple credit cards or loans in a short period, it can signal to lenders that you’re struggling financially and may be a higher risk borrower.

Only apply for credit when you need it and space out your applications over time.

 

  • Consider a credit-building card

 

If you’re just starting to build your credit, a credit-building card can be a good option. These cards are designed for people with limited credit history or poor credit scores.

They typically have lower credit limits and higher interest rates than traditional credit cards but they can help you build a positive credit history if you use them responsibly.

Loqbox offers a range of ways to rebuild your credit score which look quite interesting and novel.

 

 

 

  • Keep old credit accounts open

 

The length of your credit history is another factor in your credit score. The longer you’ve had credit accounts, the better it looks to lenders.

If you have old credit accounts that you’re no longer using, it can be tempting to close them. However, closing these accounts can shorten your credit history and negatively impact your credit score.

Instead, consider keeping these accounts open and using them occasionally to keep them active.

In conclusion, building your credit score in the UK takes time and effort. Check your credit report, pay your bills on time, use credit responsibly, apply for credit in moderation, consider a credit-building card and keep old credit accounts open. With these steps, you can build a positive credit history and improve your financial health over time. Remember to always seek professional advice if you are unsure about any financial decisions.  You know it makes sense.*

 

 

*Risk warnings

The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based purely on personal opinion and experience.