How to build a credit score

Unsure of how to build a credit score quickly and reliably? Our clear guide will outline the key steps you can take to help improve your credit score.

Written by

The Editorial Team

Experts in personal finance, insurance and utilities

Last Updated

7 AUGUST 2023

11 min read

What is a credit score?

A credit score is a figure used by lenders to determine if you’re a high or low risk when it comes to borrowing. It could also give you an indication of how likely you are to be accepted for credit.

Your credit score is based on your credit report, which is a summary of how you’ve managed credit in the past. To be clear, credit means borrowing money under the agreement you’ll pay it back later.

What are the benefits of improving my credit rating?

A good credit rating could help improve your chances of successfully applying for credit in the future. A high score shows lenders that you’re able to manage your finances sensibly and could make repayments on time.

Benefits of a good credit rating:

It could unlock lower rates of interest, which could make borrowing cheaper.
You might be able to get a higher credit limit and borrow larger amounts. This could be particularly useful when applying for a mortgage.
You may gain access to promotional offers, and a wider range of offers and lenders.

How to check your credit score

You can check your credit score by using a credit reference agency (CRA).

The three leading UK CRAs are Experian, Equifax and TransUnion.

Each agency offers:

Free access to your statutory credit report – this provides a basic snapshot of your credit history but doesn’t include your credit score.
Experian and Equifax offer a free 30-day trial, which gives you access to your full credit report and your credit score. After that, you’ll need to pay a monthly fee.

Be aware that the three agencies have slightly different credit score ratings. A figure could be a good credit score with one credit reference agency but an average or even relatively bad credit score with another.

How to improve your credit score

There are a number to steps you can take to help improve your credit score:

1. Get on the electoral roll

Register to vote. It’s quick to do, even if you live in shared accommodation. Credit providers use information from the electoral roll to confirm your details are correct and it’s a key factor in building your credit history.

You can register to vote at any time on the GOV.UK website.

2. Check your credit report for any mistakes

Before you apply for credit, check that your credit report is accurate and up to date. If you’ve moved over the past few years, make sure the registered address is your current one. Also check that any old bank accounts have been closed.

A regular check of your credit report could also uncover any fraudulent activity that you weren’t aware of, helping protect your credit score. If you see any suspicious activity, like a surge in the amount you owe or an application you didn’t make, report it immediately to your lender.

3. Try to avoid moving home a lot

Sometimes moving can’t be helped, but lenders like stability. They could see moving home regularly as a sign that something’s wrong, for instance, issues with paying rent.

4. Always pay on time

If you meet all repayments and repay outstanding debts on time, your score is likely to improve. But the opposite is true if you miss payments.

A missed or late payment could remain on your credit file for up to six years. That’s a long time to have a black mark because of a bill you forgot to pay.

Avoid late payments by setting up a direct debit for utility, phone and credit card bills.

5. Make sure your name is on some of the bills

If you share a house, make sure your name is on one or more of the utility bills, for example, gas, electricity or water. Utility bills in your name can help boost your credit score. If you’re contributing to the household bills each month but they’re in someone else’s name, only they will benefit.

6. Beware of your partner’s credit history

Applying for a joint bank account, mortgage or loan with someone else financially links you together. If your partner has a poor credit history, it could affect your own chances of getting credit in the future. If this is the case, it’s best to keep your finances separate.

Having separate finances could also make things easier if you split up. If you have joint finances and decide to call it a day, you’ll need to contact the credit reference agencies and ask for a letter of disassociation.

This will stop your ex’s credit history affecting yours in the future. You’ll need to close any joint bank accounts or pay off any joint loans before you can do this though.

7. Consider getting a pre-paid card instead of a credit card

Applying for a credit building pre-paid card is an alternative to getting a credit card. Pre-paid cards allow you to load cash on to them to spend in any way you choose. They can also be a useful alternative to carrying cash.

8. Think about applying for a credit-building credit card

If you have bad credit history, you might want to consider applying for a credit-building credit card. If you’re accepted, you may be able to improve your score and potentially unlock better deals in the future.

It will give you the chance to prove that you’re able to make all your repayments on time and can manage a credit card balance or other lines of credit.

9. Avoid using your credit card to withdraw cash

Using a credit card to withdraw cash from an ATM can be very expensive. You’ll be hit with high fees and interest, especially if you take out money using your credit card abroad.

It could also be a red flag for lenders who may think you’re having trouble managing your finances.

10. Use a soft search eligibility checker

Every time you make a credit application, a hard search will be marked on your credit report. If you’re rejected or make too many applications, it could damage your credit score.

Before you apply for a credit card, use a soft search eligibility checker to find out how likely you are to be accepted.

A soft search of your credit report can only be seen by you, not the lender. It won’t affect your credit score in any way.

11. Don’t keep applying

If your application has been rejected, don’t keep applying elsewhere. Every time you apply for credit, it leaves a footprint on your credit file. Too many applications over a short period of time makes it look like you’re struggling financially and are desperate for money. It could make lenders think you’re a credit risk.

12. Pay insurance premiums upfront if possible

If you choose to pay for your car or home insurance in monthly instalments, a hard search will usually be done beforehand. It could also end up costing you in interest charges over the course of a year.

If possible, pay upfront to avoid any hard searches being marked on your credit file.

13. Keep your credit utilisation low

Your credit utilisation is the percentage of your credit limit you use. For example, if you have a credit limit of £1,000 and use £500, your credit utilisation is 50%.

Lenders see a low utilisation percentage as a big plus - it can also increase your credit score.

14. Only borrow what you can afford to pay back

Getting into deep debt is never a good thing. Struggling to make repayments could eventually lead to a County Court Judgment (CCJ), Individual Voluntary Agreement (IVA) or even bankruptcy.

These can stay on your credit file for up to six years and could have a huge impact on your credit score for years to come. Only borrow what you can afford to pay back.

At the very least, make sure you’re able to pay the minimum monthly repayments.

How long does it take to build my credit score?

Once you’re using credit responsibly, it can take several months for your score to improve. That’s because it takes time for credit agencies to ensure they have the most relevant information about how you’re using credit.

Just be aware that opening a new current account or getting a credit card could lower your score for a while.

What can lower your credit score?

There are several things that can lower your credit score,

Late or missed payments – these will be marked on your credit report, almost certainly lowering your credit score.
Making too many applications for credit – if you’ve been refused credit, don’t immediately start applying to every other credit card provider.

Applications for credit will be marked on your credit report, so many applications in quick succession could affect your credit score negatively.
Getting a new credit card and never using it or using it too much could also negatively affect your credit score.
A history of large debt or bankruptcy – having a difficult past as a borrower can have a long-lasting effect on your credit score.

If this fits your situation, you’ll need to slowly rebuild your credit score over time. Unfortunately, there are no quick fixes.

I don’t even have a credit history, so why do I have a low credit score?

It may seem unfair that you’re given a low credit rating just because you haven’t borrowed before. But lenders base the risk of lending you money on your repayment history and debt management.

If you’ve never had a credit card, loan, mortgage or overdraft, they have no evidence of your ability to pay back what you owe.

To start building a credit history, consider taking out your first credit card and making a few small purchases. Be sure to pay back the full balance each month to show you’re capable of good money management.

What is new credit and how will it impact your credit score?

New credit is exactly that – a new line of credit you’ve opened. This could be a new credit card, loan or mortgage.

Once you’ve opened that new credit, you might see a slight change to your credit score. This could be an increase or decrease, but it shouldn’t be too significant.

As long as you continue to meet your repayments and keep on top of your credit, your credit score should improve. This is because you’re proving that you can manage your money well as a borrower.

But if you start making late repayments or miss them entirely, you’ll quickly feel the negative impact on your credit score.

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