How to build your credit score

What is a good credit score?

A UK credit score is a number that demonstrates your history of paying debts and signals your trustworthiness of taking on new debts. The higher the score, the better.  

The numbers themselves for a "good credit score" vary depending on the credit ratings company. For example, according to The Telegraph, Experian’s credit score scale that goes to 999, and the UK average is 759 (categorised as “fair”). Equifax credit scores go up to 700, and the UK average is 380 (also “fair”).

Why do I need a good credit score?

A decent credit score is essential for adulting. That includes getting a new credit card and applying for a loan like mortgages and auto loans. Landlords use your credit score to decide if they will rent to you, and cell phone providers may use it to decide if you can be trusted with a contract. You may still be able to do these things with a bad score, but your options will be considerably fewer, potentially more expensive and usually worse. A bad credit score can also stand in the way of a job, as some employers run credit checks to see if you can be trusted with company finances.

Who needs to build a good credit score?

Anyone coming of age to control their own finances, or simply trying to shake off a bad financial history is in a position to build up their credit score. And if you are just moving to the United Kingdom from abroad your previous credit score, for better or worse, does not come with you. You will most likely have to rebuild it from scratch (although a credit report from overseas can help with some applications).

Even people with a high credit score must maintain their good standing to continually unlock financial savings and benefits.

Best ways to check your credit score for free

The UK has three credit reference agencies that build your credit reports using information about you, your UK accounts and payment history. They are Experian, Equifax and TransUnion (formerly Callcredit).

All three use similar calculations and sources to determine your credit score, and therefore should provide you with a similar rating. As their scoring ranges are different the final number will be different for each, but the meaning will be the same.

All agencies are required to provide you with a free credit score check. In fact, you can access your score and a basic report for free from all three agencies as often as once a month. This should give you a sufficient indication of your current and future progress.

Each also offer a monthly paid service with a 30-day free trail if you want a more detailed report, monthly/weekly or even real-time updates to your score and coaching to help improve finances.

Is it bad to check your credit score?

No. It’s encouraged, and it won’t affect your credit rating or credit score. You can periodically check in with all three UK credit reference agencies, although they will likely charge if you want to see your score more than once a month.

How to build your credit score in the UK 5 simple steps

You cannot drastically increase your credit score overnight. Still, these are steps you can take RIGHT NOW, if you haven’t already, that will set the wheels of a good credit score in motion.

1. Register on the electoral roll at your address. Register even if you’re still living at home with parents or crashing on a friend’s futon. Companies use this information to confirm your name and address and other basic information necessary to conduct a credit check.

2. Get yourself recognised by the system. Open a bank account, and start using it to pay off bills, deposit pay checks and generally build up a stellar payment history. The more debits you can link to the account, like utilities, phone contracts and rent, the better—assuming you are paying them off in full each month.

3. Get a credit card. If you don’t have a great score, you can’t be too picky, but even a card with a small credit will do the trick. Many banks will offer a basic credit card to help build credit. Don’t let it sit in a drawer; you have to use it to build up a history.

4. Don’t use all that you’re given. The prevailing wisdom is not to spend more than 25% of your available credit (for example, not spending more than £250 on a credit card with a £1000 per month limit). And stay out of the overdraft. This helps prove that you are capable of taking on more debt, and over time not only will your score go up, the credit company should increase your line of credit. You can use Money Dashboard to help monitor and budget this spending.

5. Make payments regularly and reliably. Pay off any debts in full every month, even if you’re offered minimum payment options. This proves you’re capable of handing debt responsibly. Pro tip: set up direct debit payments from your bank account to the card, so you never miss a payment thanks to automation.

Learning how to build a good credit score is an important part of navigating the world as a financially independent adult. A good credit score proves your trustworthiness with debt and opens doors to better loan offers, rental agreements, phone contracts and even job opportunities. If you have a bad credit score, don’t despair. Building a good credit score is an ongoing process that you can start any time. Every month is an opportunity to prove you are still—or even more—financially responsible.

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All content is for informational purposes only and is the opinion of the author. Nothing on this website should be interpreted as "advice". Money Dashboard Ltd make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use.

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