Will Getting a Credit Card Improve Your Credit Score?

You may not realise just how important your credit score is... but it can impact a whole host of financial decisions. 

If you have a poor or non-existent credit history, you could be declined for a mortgage or loan, as well as be rejected for renting a property or taking out a mobile phone contract. 

As you can see, it is essential that you maintain a good credit score or start building one if yours is less-than-impressive.  

A credit card can be a great way to do this, but there are some rules you need to follow! Continue reading to find out how to use a credit card to your advantage... 

1.     Spend regularly 

We doubt you were expecting this to be the first rule of building a good credit score, but there is a good reason for it.  

A good credit score is built from responsible borrowing. So, that means you have to prove you can lend money and make the appropriate payments on time. 

By spending regularly on your credit card and making your payments every month, you could build your credit rating over time. 

This doesn’t mean you should put big, unnecessary purchases on your card... but you could use your credit card to pay for your next food shop or petrol top up.  

2.     Keep your credit usage low 

Credit usage is amount you have spent of your available credit limit. 

So, let’s say you have a limit of £2,000 and you’ve spent £1,000 on your card, your credit usage rate is 50%. 

However, if you want to build a good credit score, Experian recommends keeping your utilisation rate below 30% of your limit. By sticking to this rule, you could be rewarded with 90 points added to your credit score... plus an extra 60 points if you keep your balance below £50. 

On the other hand, excessive spending could have a negative impact on your credit score. People who borrow more than 90% of their available credit limit could see their credit score fall by 50 points, Experian warns. 

3.     Make your repayments every month 

Remember, the Credit Reference Agencies want to see that you can borrow responsibly... so that means making your monthly repayments on time, every time! 

At the very least, you must make the minimum monthly repayment as stated by your bank. However, we recommend paying more than this, or clearing your balance, if possible, in order to pay off your debt quicker and minimise interest charges. 

If you happen to miss the payment deadline, your credit score could fall by 130 points and the late payment may even be recorded on your credit report for up to 6 years!  

This means that next time you apply for credit, lenders will be able to see this black mark on your report and you may find it harder to be accepted for other financial products in the future. 

Struggling to get approved for a credit card? 

We understand it can be hard to get accepted for a credit card if you have a poor credit history. But don’t worry, not all hope is lost! Here is what you can do... 

Tip number one: stop applying for any more credit. Numerous rejected finance applications don’t look good on your credit report. Lenders may view these negatively and look at you as a risky candidate for credit. 

Tip number two: use an eligibility checker for a credit builder credit card, before submitting the full application. An eligibility check won’t leave a mark on your credit report that lenders can see, and the acceptance criteria normally isn’t as strict as high-street products.