How to build good credit in the UK

Dec 28, 2020

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Editor’s note: This story has been updated.

If you’re a regular reader of TPG U.K. you’ll know we talk about how points and miles can help you maximise your travel. One of the best ways to earn them quickly and most efficiently is through a credit card that earns points and miles.

While I’ve previously explained some of the basics of credit, including what it is and what a credit score is, you may still be left wondering how to get a good score. After all, some of the best cards available in the U.K. require good credit.

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Here are some tips about how you can build good credit.

In This Post

Understand the eligibility requirements

It doesn’t matter if you have the best credit score and history in the world. If you don’t meet the basic eligibility requirements of the credit product you are applying for, you will not be approved. These requirements will differ from product to product, but as a minimum, you will usually need to:

  • Be aged 18 years or older;
  • Be residing in the U.K. (for a U.K.-issued credit product);
  • Have a U.K. bank account; and
  • Have no history of bad debt, such as court judgements against you.

Check you satisfy the specific requirements if you have your eye on a particular financial product before you look at building good credit.

Related: Understanding credit card balance transfer offers

Register on the local electoral roll

This is an easy but very effective way to build your credit footprint. Even if you don’t intend to actually vote, registering on the electoral roll will show credit providers that you are a resident of the U.K. when they check, which will satisfy a common eligibility requirement described above.

(Photo by Liam Spencer/The Points Guy)
(Photo by Liam Spencer/The Points Guy)

Cancel unused credit

Consider cancelling any credit you already have that you may not use. This could include a mobile phone financing plan or a store-branded card that you don’t use. The reason this is a good idea is that credit providers may consider the amount of credit you already have before providing you with a new credit product.

If you are paying for a product you don’t use (like an annual fee), you might save some money doing this too.

That said, you can also build good credit by letting your accounts age. Generally, the longer you’ve had credit, the better it will help your score. Some issuers look at the length of history you have. So if you’re considering closing an account, consider this before doing so.

Consider starting with credit-building products

While they won’t earn you a first-class aeroplane seat, there are credit cards in the U.K. designed specifically for those looking to both build credit and use credit given to them responsibly. These cards come with very low credit limits so you can’t go on a crazy spending spree. They also usually have no or a very low annual fee. By making small purchases on these cards each month and paying the balance off each statement period, you can show credit providers that report to credit agencies that you can be trusted with credit.

Related: The best U.K. credit cards for university students

Use any credit given to you responsibly

It is critical to your credit score and credit history that you make the required payments on time each and every statement period. If you start missing payments and receiving default notices, this will make its way onto your credit history and score as credit providers report your inability to pay your bills when and as they are due. You may wish to set up direct debits for this purpose.

Paying off more than just the minimum due each statement period will show you can be trusted with credit. Ideally, you pay the full balance each time, which means you’ll also save by not paying interest.

Limit your credit applications

If you are applying for a new credit product every week, this may indicate to credit providers that you are in financial distress and desperate for any credit product you can get. This suggests you may have trouble servicing the debt and you could be trying to find new credit to pay off existing debt and throwing good money after bad. If you are looking to apply for more than one credit product (for whatever reason), try and space out your applications as much as possible — I’m talking months apart, not weeks.

Related: The best UK credit cards with no annual fee

Bottom line

Your credit history is an important asset you should aim to understand and look after. If you have no credit history at all, these are some ways to start building good credit history in the U.K. and at the same time understand how credit products work. You can also show yourself and credit providers that you can use credit products responsibly. This can start your journey to having access to more lucrative credit products like rewards credit cards.

Featured image by Gettys Images

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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