How to use a credit card to build credit

Why is a good credit score important?

Your credit score is vital – it affects your ability to borrow and the rate of interest you’ll pay. It can also have an impact on your chances of renting a home or even getting a job.

Lenders will use your credit score to assess how reliably you look after your household finances.

The higher your credit score, the more likely it is that your application for a credit card, personal loan, mortgage, overdraft or car finance will be accepted.

You’re also likely to be offered more favourable terms and lower interest rates, as a healthy credit score shows you can be trusted to take care of your money.

How can I improve my credit score with a credit card?

Using a credit card responsibly can help boost your credit score. Here are the steps to take:

• Pay on time every month: set up a direct debit to make sure you never miss a payment. If you pay late, you’re likely to be charged a fee and your credit limit could be cut.

• Repay the balance in full: if you can, pay off the entire balance each month to avoid paying interest. At the very least, make the minimum payment on time.

• Don’t spend over your credit limit: you’ll be charged a fee if you do, and your credit score will be damaged.

• Use your card carefully: try not to spend right up to your credit limit. It’s best to keep your credit utilisation ratio (the percentage of available credit that you’ve used) as low as possible. Aim to keep it under 30% - that’s no more than £600 on a £2,000 card limit, for example.

Can a credit card damage my credit score?

Yes, a credit card can hurt your credit score if you don’t stay on top of your spending. Here’s what you should try to avoid:

• Missing payments: late or missed payments can significantly lower your credit score.

• Maxing out your card: a high credit utilisation ratio could suggest to lenders that you rely on credit and can’t manage your finances. They’re likely to consider you as a high risk, which won’t help your credit score.

• Applying for too many cards: each application you make results in a hard search, which will show up on your credit report. If you make a lot of applications in a short period, it suggests to lenders that you’re struggling financially.

Which credit card should I choose to build credit?

Any credit card can help improve your credit score if you use it responsibly. However, you might want to specifically think about:

Credit builder cards: designed to help you build up a credit score if you have no credit history or a low credit score. They often come with high interest rates and low credit limits, to encourage you to control your spending and repay in full each month.

Credit cards for bad credit: similar to credit-builder cards, these are aimed at those with a poor borrowing history who want to improve their credit score.

Balance transfer cards: let you move what you owe on one or more existing credit cards to a new card with a lower or 0% interest rate for a set period, usually for a fee of around 2-4%. They can help make your debt easier to manage.

Before you apply for a credit card, use our eligibility checker to see which cards you’re likely to be accepted for. Because it’s a soft search, it won’t affect your credit score in any way.

Alternative ways to build your credit score

As well as using a credit card, there are other things you can do to build your credit score:

Check your credit report for any mistakes

Before you apply for credit, check 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.

A regular check of your credit report could also uncover any fraudulent activity that you weren’t aware of. If you see anything that looks suspicious, raise it immediately with the lender or relevant credit reference agency.

Get on the electoral roll

Registering to vote by joining the electoral roll is a legal requirement for most people, and it's simple and quick to do. Credit providers check the electoral roll to verify your identity, and it plays a key role in building your credit profile.

You can register to vote on the Gov.uk website.

If you’re not eligible to vote in the UK and can’t join the electoral register, you can add a note to your credit file explaining the reason why. To do this, you’ll need to contact the three main credit reference agencies: Equifax, Experian and TransUnion.

Make sure your name is on household bills

If you share a home, make sure your name is on at least one of the utility bills, for example gas, electricity or water. If you pay them on time, having utility bills in your name can help boost your credit score.

For more tips, read our guide on how to build a credit score.

How long does it take to improve my credit score?

Improving your credit score is a gradual process. It can take several months or even years to see significant changes, depending on your starting point and the actions you take. Consistency is key, so try to maintain good credit habits over time for the best results.