Never fear, you can build your credit score back up from a bad or non-existent credit history, even if you don't have a credit card. It only requires a few hours of life admin, a bit of financial self-control, and some time.
To repair your credit rating, here are 8 simple steps to take:
1. Start from a place of understanding.
How long it takes to rebuild credit scores may depend on how far it has to climb to reach a fair or good score. If you don’t know your current credit score, it’s hard to judge how much repairing you need to do and for how long.
All three UK credit agencies offer free credit score checks. They are Experian, Equifax and TransUnion. They largely use the same formula, so a score from any one should suffice to start your credit repair journey.
2. Register on the electoral roll.
While this may seem irrelevant to your credit score, the electoral roll is the first thing the credit agencies use to confirm your name, address and other basic information. Be sure to register even if you’re still living at home or even crashing at a friend’s.
3. Get a credit card.
If you never had credit before, build your credit history with a credit card. It takes about six months to rebuild credit history with a card. Having multiple credit cards is not necessarily better than having one well-managed card.
Space out your credit card applications. If you’re looking for a new card designed to help build you credit rating back up, remember that credit scores take a small, temporary hit every time you apply for one.
If you are rejected, that is also a hit. So apply sparingly and with some sense—if you have low or no credit (per step 1) it’s unlikely you will be approved for a great card with a high credit limit.
4. Cancel those ex-joint accounts.
Your credit score is impacted by people you share accounts with, for better or worse. So you can repair a credit score by cutting ties with bad financial partners.
If you still have any old accounts with an ex-financial partner, cut all links. This might be a joint product like insurance, mortgage or a joint credit card.
5. Close unused credit cards.
But be careful how you approach it. Unused cards with annual fees aren’t worth holding on to. And if you’re tempted to use them and dig yourself deeper into debt, get rid of it.
On the other hand, unused cards with zero balance and a history of good payment can improve your score. They also give you more available credit. Creditors look at utilisation rates—how much money you spend on credit versus how much is available—so unused, extra credit can be in your favour.
6. Don't miss payments.
Every month you must pay your bills. Credit scorers want to see that you do it on time and pay at least the minimum repayment. Set up automatic payments with your bank account so there’s no risk of missing a payment.
7. Pay off any debts and avoid paying interest if you can.
Clear a bad credit rating by paying off what’s owed.
If you have a lot of debt across credit cards, it can help to consolidate them by moving to a 0% balance transfer card. That way, you only pay one card at a 0% interest rate for the length of the introductory promotional period, which can be several months. This can help build your credit score back up fast.
If you don’t know what you owe, you can link all of your accounts to Money Dashboard’s free app. It helps you see all of your accounts, income, and credit cards in one place.
8. Some extra tools and techniques can help.
Pre-paid credit cards do not have credit lines and won’t directly help increase your credit score, but they can indirectly be an aid. If you’re worried about your keeping credit utilisation rates low, this can help you spend without credit impact.
Other online services like Loqbox.com are designed to help you repair credit by taking out a loan, which you pay off each month for a year via direct depositing into a Loqbox account. No credit check required and you get all your money back at the end of the year. The regular loan repayments help repair credit ratings.
Another service to rebuild credit rating is Creditbuilder from Cashplus. It offers a similar loan service with 12 payments over a 12-month contract.
Finally, don’t be afraid to seek professional guidance for credit history repair help. You can find unbiased free help services here.