Building your credit history

If you’ve got a patchy credit history – or even no credit history at all – it can make life more of a hassle. Building a positive credit history can make it easier and more affordable to buy a home, a car, or even a phone. Here’s what you need to know to get started.

Checking your credit history

What do we mean by ‘credit history’? It’s really a picture of the last six years (72 months, to be exact!) of your financial life.  It’s updated every month to show the payments you’ve made (or not made); your credit limits and how much you’ve borrowed; and every time you’ve applied for credit.

This information is recorded by the credit reference agencies. There are three of them, and they may all hold slightly different information about your credit history – so we’d recommend checking them all:

• Equifax via Clearscore
• Experian
• TransUnion via Credit Karma

You can do this for free, and it won’t damage your credit score.

If any of the information they hold is wrong, contact the relevant credit reference agency(ies) and ask them to correct it.

Sorting out any debts and money worries

If there are missed payments, defaults or even County Court Judgments (CCJs) showing up in your credit history, you’ll almost certainly find it harder to get affordable credit in the future.

But more importantly, these are signs that you’re finding it hard to stay on top of your finances. This can affect not just your credit history but your work, your family and relationships, your physical and mental health – just about every part of your life.

So if you spot problems that are bringing down your credit history, have a think about the root causes – and read some of our other financial wellbeing articles for ideas on how to fix them. That might mean making a budget, maximising your income, or getting help with problem debts. Whatever you do, it won’t just improve your credit history – it’ll help you stress less, too.

Of course, it might be that you’ve had no issues like this at all – but you might still have a low credit score because you’ve had little or no experience with borrowing money. If that’s the case, you can skip straight to…

Building or rebuilding

To build your credit history, you need to demonstrate that you can spend and borrow responsibly. Here’s how you do it.

• Get the basics right. Register to vote and make sure that all your bills and bank accounts come to your current address.
• Pay your bills! Some utilities providers pass on information to the credit reference agencies. If they do, potential future lenders will be able to see whether you have a history of paying all your bills on time and in full.
• Build your credit history by paying your rent. For many if not most of us, rent is the most important bill we pay each month – and now you can use it to boost your credit history, through schemes like The Rental Exchange and CreditLadder. You may need your landlord’s permission.
• Build by saving. LOQBOX is a kind of regular savings account; but the money you pay into the account is reported to the credit reference agencies as repayments on a loan. LOQBOX say that if you deposit the agreed amount in full and on time each month, within about four months you should start to see improvements to your credit score.
• Build by borrowing – carefully! A credit builder credit card could help you build up a positive credit history, as long as you keep the balance low and pay the full balance on time every month.
• Be sensible when applying for credit. Don’t forget that your credit history includes not just your actual borrowing, but also every time you try to borrow money. Applying for a lot of loans or credit cards in a short period of time, and/or having credit applications rejected, makes you a less appealing prospect to potential future lenders. So only apply for credit if you really need to, and use eligibility calculators to avoid making applications that don’t have much chance of being accepted.

 

Following these steps should help you build a positive credit history, but it won’t happen overnight. Be patient, keep your financial goals in mind, and keep going – good luck!