Can you use a credit card to build your credit score?

If you use and manage a credit card responsibly, it could help to boost your credit score.

Why is a good credit score important?

  • The higher your credit score is, the more likely it could be that an application for a credit cardmortgage, personal loan, overdraft or car finance will be accepted.
  • Depending on the type of borrowing, the lowest and longest lasting interest rates might be offered to low risk applicants, who’ve shown they can manage their finances well over time.
  • Your credit score can also affect the amount of credit you’re offered.
  • Bad credit might affect your ability to get some jobs, e.g. in legal or financial services.

It’s useful to know that the way you use and manage one type of credit, such as a credit card, is just one of the factors which could influence your credit score.

More on credit scores

How can credit cards improve your credit score?

Using a credit card and making regular payments, shows you can manage credit responsibly.

Keep credit available

Credit reference agencies will keep an eye on the amount of credit available to you, and how much you’ve used – this is known as the ‘credit utilisation ratio’.

It should help to keep balances below 25% of your available credit limit.

Use a few types of credit

Having a mix of credit accounts shows you can manage different types of borrowing, from secured lending, such as a mortgage, to unsecured lending, like credit cards or overdrafts.

It’s just useful to remember, whether or not you’re accepted, ‘hard’ credit searches could affect your credit score, especially if you make a number of full applications in a short period of time.

Build a borrowing history

The average age of your active credit accounts can affect your credit score. Having the same accounts for a long time, suggests you’re good at managing them responsibly.

If you’ve little or no experience, even if you have a good income, your credit score could be low because there’s not much to prove how well you’ll manage borrowing and repayments.

How a credit card could lower your credit score

If you don’t manage credit carefully, or you carry high debit balances, it could impact your credit score.

Missing payments

Making payments on time is an important way to show you’re managing your finances responsibly. Lenders report arrears, missed, late or defaulted payments, which could negatively affect your credit score.

It could help to set up a Direct Debit to make automated payments, but you’ll still need to make sure there’s enough money in your bank account to cover them.

Going over your credit limit

Like missed or late payments, lenders and service providers will also report instances where you go over any agreed credit limits, which are common on credit cards, overdrafts and store cards.

This can impact your credit score for a number of reasons. Not only will your credit utilisation ratio be too high, but being over your credit limit suggests you could be struggling to manage your finances.

High debit balances

If you’ve got a lot of debt and are often close to your credit limits, it could suggest you’re reliant on credit. If your circumstances changed, would you struggle to repay what you’ve borrowed?

This can impact your credit score, and the way you’re viewed by lenders and other service providers.

Applying for credit

Whether or not you’re accepted, hard credit searches could affect your credit score, especially if you make a number of full applications in a short period of time.

Many credit card providers now offer ‘soft’ credit searches, also known as an eligibility check, helping you to find cards you’re eligible to apply for, without impacting your credit score.

Does closing a credit card affect your credit score?

It can lower your credit score if you close a credit card account. This happens for two main reasons:

  • Your credit utilisation ratio could change – the gap between your available credit and what you’ve borrowed might be smaller.
  • Keeping long-held and well-managed accounts shows you’re a reliable borrower.

The impact is likely to be temporary though. Closing a credit card could help you to:

  • Keep track – with fewer accounts, the risk of missing payments etc. could be lower.
  • Limit the temptation to spend beyond your means.
  • Limit the potential of fraud on open accounts.
  • Switch to a credit card with interest rates which better suit your needs.

Building your credit score is a tricky balance of having and using credit, but not too much.

Tips on managing a credit card

  • Making payments. If you don’t make payments on time or go over your agreed credit limit, in addition to fees and charges, you could lose any introductory or promotional interest rates on your account. In that situation, your standard account interest rates and fees will apply instead.
  • Minimum payments. You must make at least the minimum payment on time each month, but we recommend paying as much as possible to reduce your balance and limit any interest costs. This could also prevent you from falling into persistent debt.
  • Credit score. Your credit score could be affected if you don’t keep track and manage your account well, making it harder for you to get credit again in future.
  • Interest. You’ll pay interest on purchases unless a 0% promotional rate applies, or you pay off your monthly statement balance in full and on time every month.
  • Stick to a budget. It’s a good idea to only borrow what you really need and can reasonably afford to repay. Build your understanding of money basics by checking out our series of guides and tools.

More tips for managing credit cards

Lots of things affect your credit score

How you use and manage a credit card is just one thing which could influence your credit score.

Other factors include whether or not you’re on the electoral register, how often you move and change addresses, how well you manage household bills, and even the credit history of someone you have joint accounts with.

More on what affects your credit score

A summary on using credit cards to boost your credit score

There’s no simple answer, but using a credit card responsibly can help to improve your credit score.

  • A good credit score boosts your chances of being accepted for credit when you need it.
  • When using a credit card, limit your spending and always make payments on time.
  • High debit balances, missed or late payments, going over any agreed credit limit and full credit applications could all damage your credit score.
  • Lots of factors can influence your credit score, in addition to managing a credit card well.

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