As you get older and become more independent you may start applying for loans, credit cards, mobile phone contracts or more importantly, a mortgage! A credit score is an indication of how you would be assessed by a lender. 

If you have previously applied for a lot of credit, then you will be less likely to be accepted for credit. They may also look at any late or missed payments, as well as whether you have any current outstanding payments to other lenders.

These factors then allow the lender to decide on how much to lend you. With credit cards, some have a maximum limit of £1,500 and some only have a maximum as £200. 

If you are accepted for a lower limit and then make reliable monthly payments, then your limit may increase within a couple of months. Please note that when applying for a credit card, you will be given the option for your amount to be increased automatically or for you to confirm the increase. 

Here are a few ways you can build your credit:

1. Pay all of your bills on time – this shows lenders how reliable you are. It is also useful to have a direct debit set up as you then know what payments are going out on which days of the month and how much. This allows you to make sure you have the current funds in your account for that given date to prevent being overdrawn or getting into any debt. 

2. Keep balances low on credit cards by only using them on small purchases. ALWAYS pay it back in full every month so you are not hit with late payment fees or high-interest rates, but most importantly do not spend more than you can pay back. 

   You can also use credit cards to protect your online purchases. If you buy something online and it doesn’t arrive you can get this refunded by the credit card company for example.

3. Don’t apply for unnecessary credit as this can harm your credit score due to too many hard searches on your credit report.

4. If you have low/bad credit you may find it more difficult to get credit or borrow money, so you may find it a good idea to apply for a ‘credit-builder’ card which has low application requirements and allows you to build your credit over time. 

5. Registering your electoral roll at your current address – you can do this even if you are living with your parents or in shared accommodation!

6. Keep credit utilisation low - If you have a credit limit of £1000 and you’ve used £500, your credit utilisation is 50% and the lower this is, is more attractive to credit lenders you will be. Aim to keep it at around 25%

There are a range of different credit reference agencies such as Experian which you can use to check your credit score for free, but don’t worry as checking your score will not impact it!

Should you have any further questions on credit scores please do not hesitate to let us know.