24/06/2024

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How to Build Up Your Credit Score (UK)

3 min read

How to Build Your Credit History from Scratch?

If you are just starting your financial journey, you may realise that certain places request a credit score or a credit history to make an informed assessment on lending to you. These are typically banks when offering you finance, mortgage brokers, car dealerships, even down to your phone contract suppliers. Without a credit history or some form of information the lending process can be a bit of a catch 22 for young individuals or individuals with below-average credit scores.

A smart way to build your credit history up is to consider a credit building credit card, such as thimble. Credit builder cards like thimble. are typically providing a low borrowing amount, anywhere from £100-£1,000 initially; with higher-than-average APR percentages. By letting individuals lend a smaller monetary amount, that is paid back each month on a specific date, set at a higher interest rate, you can confidently showcase to future creditors that you can make repayments on time and are trustworthy and can reliably make the repayments on time.

Credit Building Credit Card

Why is Good Credit Score Important?

Your credit score influences your offered interest rates and the finance you’re considered for, loan amounts on offer, whether you need a guarantor and other factors such as the maximum opening balance on your credit cards and loans. Your credit history and credit scores are used to build a profile of the potential risk of lending an individual finance. If you have poor personal credit of have had a county court judgement (CCJ) or Individual Voluntary Arrangement (IVA) which is a formal debt solution to help an individual pay back debts over a set period, your chances of getting credit will be slimmer. You will typically be considered a higher risk for lenders/creditors to lend to, therefore, to mitigate that risk, you’ll typically pay higher interest on any borrowing or be asked to secure your loan against an asset or bring in a guarantor in case you default on payments.

Can You Check Your Current Credit Score?

If you want to check you Credit Score then you can visit the following three UK-based Credit Rating Agencies (CRA) Online to receive a Free Credit Score Estimate:

  • Experian
  • Equifax
  • TransUnion

These three Credit Rating Agencies Credit offer a free check and give an estimation of your financial health in the eyes of the banks and lenders, allowing you to gauge where you’re at and what, if anything, you need to improve.

If you’ve checked your credit score and are pleased with the results, there are a few house-keeping tasks you can do to maintain the health of your score (or improve upon it).

The most obvious thing you can do is ensure that any payments due or paid or settled on time and don’t go past the set date of repayment. You can also build credit by proving where you live, this can be done by registering for electoral roll at your current address – you can even do this if it’s a shared accommodation or your parents’ house.

If you have any credit cards already, you want to ideally try to keep your credit utilisation low (this is the percentage of your credit limit used, for example £1,000 spent of a £2,000 limit is equal to a 50% credit utilisation). Lenders will use credit utilisation as a consideration before approving or rejecting your finance.

In the contemporary digital world, we live in currently, cyber fraud is always a threat to be considered. It’s always worth checking your finances as often as possible and report any irregularities that you may have spotted. If a fraudster has gained access to your finances and taken out credit in your name, then this could have a negative implication on your credit rating. Keep an eye on your bank account and raise any suspicious activity to your bank or building society straight away.

If you need more information or help regarding your personal finances, you can find free expert advice from financial charities such as ‘Step Change Debt Charity’.

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