Debt & Borrowing

How to build your credit score with a credit card

There are many ways to build your credit score, but one of the most important is with a credit card. 

Remember that timely repayment is one of the principal earmarks of a good credit score. You can easily prove your trustworthiness by getting a credit card, using it responsibly, and paying it off on time and ideally in full.

How to build credit with a credit card

Get a credit card and follow these basic but essential rules to increase credit scores. 

Always repay everything you owe, preferably within the same month or at least the minimum repayment. This can’t be overstated. Missing payments, late payments and underpayments will not only damage your credit score, but it also can lead to fees and high interest charges that make it even harder to pay off debt month to month. 

Meeting minimum payments is not going to hurt your score, but going above that amount will improve credit scores month over month.

Stay out of the overdraft. This shows you are capable of budgeting—another tick on the credit score checklist. To help you keep payments on track, set up an automatic monthly payment between your card and bank account.

Another pro tip for improving a credit score with a credit card: spend far less than your limit. The ideal is to use 25% or less of your credit limit. That means if you have a credit limit of £500, don’t use it for any more than £125 in a month. This proves you don’t need to use credit to make ends meet—credit rating agencies look favourably on that. 

You can use Money Dashboard to keep your spending in check. Simply link up your credit card accounts and set budgets. The app will alert you if you are about to hit or go over budget.

But which credit card is best? 

There are many credit cards to build credit scores. 

You can compare most available credit cards to build credit in the UK on a site like Moneysupermarket or Compare the Market. (Filter for cards designed for credit building.) 

Not all cards are created equal. If you’re starting from a position of bad or no credit history, your options will be pretty limited. 

And don’t aim too high. A rejected card application can impact your score. As can sending off many applications in a short period of time. That’s because agencies run “hard searches” when you apply, which remains on your credit report for two years. 

So if you have a bad credit score, select a reasonable target or two before firing off your request. 

Some card providers like Ocean Finance run a “Quick check” that won’t affect your credit rating, but their interest on the unpaid debt is very high. These are tradeoffs you will come to expect if you have poor credit.

Have patience

Don’t panic if you hate your credit card options, think of it as a starter-card and a stepping-stone to better deals.

And remember, you can’t improve credit scores overnight. You pay off cards monthly, and month over month credit agencies will see a trend of responsible behaviours. It takes about six months for your credit history to establish itself, so stay on track and stay disciplined.

In time, not only will you boost credit scores, your credit company may also offer to raise your credit limit, allowing you to spend a bit more without sacrificing your low debt to credit ratio. And as your credit rises, you can look for better cards with more rewards and perks. 

And in the meantime, beyond improving credit scores with credit cards, there are other non-card related steps you can take to raise credit scores.

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.

Becca Lipman

Financial Editor