A Beginner’s Guide to Building a Positive Credit History

Do you need credit soon?

Whether you’ve been saving for an important one-off purchase or you’re preparing to apply for a mortgage, you need to demonstrate a respectable credit score first. 

When faced with financial emergencies and unable to secure loans through conventional means due to unfavorable credit scores, individuals often turn to no credit check loans as a viable solution.

Starting from scratch usually means you’ll need to build your credit history. While this responsibility might feel confusing and time-consuming, being able to prove that you’re a responsible customer will serve you well for years to come.  

Why is Credit Score so Important?

Credit history provides lenders with information about your ability to pay back a loan. 

With a good credit history to your name, you’ll be more likely to be accepted for loans, mortgages, and other financing options. If you have a negative score, lenders won’t look at your application kindly and you might find it much more difficult – or impossible – to secure finance. 

A good credit score proves to lenders that you’ll be able to pay the loan back, in full and on time. Being able to afford the loan makes no difference if you can’t provide a lender with evidence of a strong credit history.  

How to Build a Positive Credit History

There are no shortcuts to building a positive credit history. However, there are a few healthy habits that you can pick up in the meantime:

• Check Your Credit Report 

Knowing where you stand is crucial to working out the best ways to improve your credit score. However, checking your credit report for the first time can feel daunting and confusing, so it’s important to know how the process works.

There are several credit-reporting companies operating in the U.K. These bureaus, including Equifax, TransUnion and Experian, report your information to banks and lenders when you apply. 

The score works on a different scale for each reporting company, but will usually appear anywhere between 300 and 850, with the lower ends reflecting poor debt management – or just a lack of credit history. 

• Manage Your Bank Account

Credit agencies monitor your bank accounts, including any outgoing direct debit payments, loans, or credit agreements. It’s a good idea to make sure that your bank accounts are as organised as possible, keeping sufficient funds in the accounts linked to regular payments.

Missing a payment will reflect negatively on your credit score and could carry a lasting impact over several years. Try to keep on top of your banking and spend sensibly while you build your credit score, especially if you often find yourself close to your credit limit. 

• Start Small

Don’t take on more than you can handle when it comes to opening your first lines of credit. This can do more harm than good, and you might end up unable to meet repayment deadlines if you need to cover unforeseen costs in the meantime. 

Only take out what you need, and always ensure that you can meet repayments on time. Many young people use ‘buy now, pay later’ initiatives as a low-commitment approach to building credit score for the first time. 

• Keep Track of your Spending

Lastly, being sensible with your money should always be a priority. Make sure to cut out any unnecessary spending and try to set a realistic budget too. 

Making the time to look over your spending and savings each month will allow you to spot further opportunities for improvement. Once you have an idea of how much you can afford to sacrifice, you could start thinking about accessible finance options purely to build your credit score. 

If you’re feeling overwhelmed with debt, it’s never too late to seek help. You can find free and confidential advice on debt and money online, but making an appointment with your bank could help you to tackle the problem faster.

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