If you have just received your National Insurance card and are entering the world of work, you will soon realise the importance of building credit. Your credit score is basically a snapshot of your financial health for banks, lenders, mortgage providers or creditors to view to assess your risk of defaulting on credit.
If you are just entering the world of work your credit history will essentially be a blank canvas and painting a picture of your finances is important.
If you’re looking to build your credit history and ultimately your credit score, you can do some of the following:
- Consider applying for a credit builder card such as thimbl. credit card. A credit builder card is. Card that has been specifically created to try and help build people’s credit score up. They are typically low lines of credit, typically credit up to £1,000 with a higher-than-average APR percentage. They work by you paying back a set monthly amount. By not missing payments you are demonstrating you can manage your finances and this in turn builds your credit score, provided you don’t default or pay late. This demonstrates to potential creditors that you are not a high financial risk for them to lend to and will result in better lines of credit and lower interest rates, typically.
- Another thing you can do, if you haven’t done so already is to go to your local Bank or Building Society and apply to setup a UK Bank Account. This creates an official audit trail for Banks to see that connects you with your finances, and let’s a hard credit search determine your income vs. your outgoings and make an informed decision regarding yourself and credit.
- Go and vote! Signing up for the electoral roll is a great way to help build credit. It shows that you have a fixed abode for bank statements. A common misconception is that you have to own the home, this is not the case, it can be a rented property or your parents’ property which you live in and provided you can securely receive letters to this registered address, it can be used for the electoral roll, which will help improve your credit score.
- If you haven’t already done so, consider taking out a mobile phone contract. Mobile phone contracts are a great way to build credit as the payments are contracted over a set period (typically 12-24 months) with a small recurring monthly fee. This demonstrates to the Bank that you can be trusted to repay finance and make the payments on a set day for a set amount each month. This in turn improves your credit rating and your overall credit health – provided you don’t default or pay late!
- Track your small regular payments. You can now use independent tools to track your rental payments or subscription payments (such as Netflix, Amazon or Apple subscriptions), these independent tools such as Credit Ladder use open banking to track your frequent payments and allow you to track them and build them into your credit score.
You can view your credit score by submitting a free credit score check with a regulated UK Credit Rating Agency, such as Equifax or Experian.