Building your credit history

Your credit history is a record of how you use credit, such as when you’ve applied for it, whether you’ve paid it back, and how much you currently have access to. If you’ve recently turned 18, are new to the UK, or just haven’t held a credit account in the last six years, it’s likely you won’t have much of a credit history.

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Why is it important to build a credit history?

A credit history is one of the ways lenders decide whether or not to lend you money. It’s partly from looking at how reliable you’ve been when it comes to making payments on time in the past, that they make a judgement about whether they want to lend to you now.

This can make a huge difference when it comes to you getting what you want out of life. It’s about getting the right credit card with a better rate, for something you’d like to buy right now, and it’s really important for what you might want in the future too.

If lenders can see that you can be relied on to make payments on time, they’re more likely to lend to you when it comes to larger loans, say for a car, or even a mortgage for a house.

How long does it take to build credit history?

Building a credit history won’t happen overnight, but if you follow the steps we get to later in this guide, you can actually start to see some good results with it sooner than you might think. If you’re just starting out with your own finances, you’ll need to have an active account for at least three to six months before a credit score can be calculated.

When you’ve started to build your credit history, make sure you keep on top of any payments you need to make, so that the history you do build is one that you’re really proud of, and one that’ll make lenders more keen to lend to you.

How do credit scores work?

A credit score is a number that shows lenders how good you’ve been at keeping up to date with payments when you’ve borrowed money. Lenders use the score, and other information they have about you, to decide whether they want to lend you money.

Credit reference agencies, like Experian, calculate your score based on how well you’ve managed your finances in the past. The score is built from your credit history, including the types of accounts you’ve had, any late payments, and the amount of debt you have altogether.

Does having little or no credit history affect my credit score?

Your credit score reflects your ability to get credit – the lower it is, the more you may struggle to get approved by lenders. If you have little or no credit history, this may negatively affect your credit score.

You’re probably thinking that’s a bit odd. If you’ve never needed to borrow money before and you have no debt, surely you’re the perfect person to lend to? The thing is, most lenders like to see a good track record of sensible borrowing – it helps them decide if you’re likely to pay them back on time.

Unfortunately, you’re unlikely to get a high score without having used credit – even if you’ve taken other steps to improve your rating, like registering on the electoral roll. And since you often need a good score to get approved for credit, you may feel like you’re stuck in a ‘catch 22’! We explain in detail exactly what you can do to build your credit history from scratch.

It’s worth noting that some people may have a low score because of negative influences on their credit report, such as late payments. If this is the case for you, there are ways you can improve your score.

What if my credit history isn’t in the UK?

Sadly, credit scores can’t cross borders. So, if you’ve built your credit history in a country overseas, you’ll effectively be starting from scratch when you come to the UK.

UK credit reference agencies (CRAs) like Experian build credit reports using information about UK accounts – so even if you have a perfect credit score overseas (whether it’s your home country or you’ve been living there as an expat) it won’t count here.

If you’re looking for credit in the UK, make sure you have a copy of your overseas credit report and offer it to lenders, as it may help with your application. You can also follow the simple steps outlined below to build your credit history.

Where can I see my credit history?

You can see your credit history using any of the three UK CRAs. Each CRA creates their own credit report based on the information they have access to. This means your report may vary from one CRA to another, depending on what information they hold on you.

You can get your free Experian Credit Score by signing up with us. To see your up-to-date Experian Credit Report, get personalised tips for improving your credit score, and benefit from report alerts and more, you can take out a CreditExpert paid subscription – this starts with a 30-day trial if you’re a new customer*. Alternatively, you can order your statutory credit report, which gives you a one-off copy either in print or online.

How can I build up my credit history?

No matter if you have no credit history, a poor credit history or are moving to the UK from overseas, there are lots of simple steps you can take to build your credit profile and improve your chances of getting credit.

It’s important to know that it may take up to six months to start seeing the benefits of these actions. It can take time for some information to reach us, and things like opening a new bank account or getting a credit card can lower your credit score initially, before helping it improve.

  1. Get on the electoral roll. It’s quick and easy to register on the electoral roll, even if you live at home or in shared accommodation. Lenders use this information to confirm your name and address are correct and up to date, so it’s crucial to building your credit history. If you’re not eligible to register on the electoral roll (e.g. you aren’t a UK national), you can add a short notice of correction to your Experian Credit Report explaining why.
  2. Open a bank account. Having a bank account and managing it well shows companies you’re financially responsible, and starts to build your credit history positively. If you have an overdraft, stay well below the limit (using no more than 25% of it is a good rule of thumb) and try to pay it off as quickly as possible.
  3. Get a credit card. If you’ve opened a bank account and are managing it well, the bank may also be willing to give you a credit card to build credit. Paying it off on time and in full each month will help build a positive credit history and improve your score.
  4. Take out a small form of credit. This might be a mobile phone contract or store card. They’re usually easier to get accepted for than credit cards, but can still demonstrate your ability to pay your bills on time and be financially responsible.
  5. Manage your household bills well. Looking after your utility accounts (e.g. water, gas and electricity) can help build your credit history and show lenders you’re responsible. Even your rent payments can improve your score, provided you make them on time and in full – sign up to CreditLadder to arrange for information about your regular rent payments to be added to your credit history.
  6. See if you could get an instant score boost. By securely connecting your current account to your Experian account, you can show us how well you manage your money. We’ll look for examples of your responsible financial behaviour, such as paying your Netflix, Spotify and Council Tax on time, and paying into savings or investment accounts. We’ll share a summary of your boosted data with participating lenders when you search or apply for credit. Find out more about Experian Boost.

As well as taking the steps above, it’s important to protect your credit history and score from damage. Here are our three top tips for keeping your score healthy:

  1. Set up direct debit payments. Late or missed credit payments can lower your score and may stay on your report for up to six years, so paying bills on time is essential. Consider setting up direct debits for your payments to ensure you don’t accidentally miss one. An unpaid and ignored debt may results in a CCJ (County Court Judgement) which can negatively affect your credit.
  2. Limit your credit applications. Making lots of applications in a short space of time can make it look like you’re desperate or overly reliant on credit, so try to space your applications out. When applying, lenders carry out a ‘hard search’ which leaves a mark on your report. A maximum of once every three months is a good rule of thumb, but remember that lenders’ criteria may vary.
  3. Only use a small percentage of your credit limit. If possible, try to use no more than 25% of your available credit, as a higher balance may reduce your score. So, if you have a credit card limit of £500, try not to spend more than £125 on it.
  4. Finally, when building your credit history it’s useful to keep a close eye on your credit report and make sure it’s always up to date and correct.

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