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How do I build credit without a credit card?

Written by Tom Martin, Content editor

Edited by Florence Codjoe, Content Editor, 11 September 2020

Taking out a new credit card can be a helpful way of building up a good financial history – but are there other ways of improving your credit score?

Guide to building credit with no credit card

Do you want to improve your credit score without using a credit card? Taking out a new credit card can be a helpful way of building up a good financial history – but there are other ways of improving your credit score too. Read on to find out more.

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Do you have to have a credit card to have a credit score?

You build up a credit score by demonstrating that you can handle your finances well – for example that you can pay bills on time and repay money you have borrowed.

Improving your credit score can be done without a credit card in the UK, because there are a number of alternatives to make your financial profile more credit. 

What is my credit score?

Your credit score is a measure of your financial health. Lenders, such as credit card companies and banks, and companies like mobile phone providers, consult the information held by credit reference agencies to check whether you're a reliable user of credit who will pay bills and repay loans.

It's a good idea to request a copy of your credit report from one of the credit reference agencies in the UK. Finding your credit report is free and will help you spot any mistakes in your credit history, which may count against you.

If you have a low or bad credit score it can be difficult to start improving your credit rating again. In this guide, we explain how you can build your credit rating without taking out a credit card.

My repayments have been affected by COVID-19. Will that hurt my credit score?

If you have had to make a payment holiday during the coronavirus and you have officially organised this with your bank, mortgage provider, credit card company or other financial firm, then this should not affect your credit score.

So naturally, you might be wondering, how do I improve my credit score without a credit card, and do you need a credit card to have a credit score? If you have struggled with debts in the past and don't feel comfortable taking out a new credit card or loan to improve your credit score, there are other ways.

Read on for our tips on how to build your credit rating without taking out a credit card. After that be sure to check out your credit report to see what and how much you need to improve. Checking your credit report can also be good to see what your risk is for identity fraud.

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Find a credit card designed to help you improve your credit rating.

How to improve your credit score without a credit card

If you don't want to apply for a new credit card either because you had problems with borrowing in the past, or you would rather not use one, then here are our tips for building credit without a credit card.

While proof of making debt repayments is the most common way of improving your credit score, it is not the only way to build your credit rating.

Here are our tips for building your credit score without taking out a credit card:

Get on the electoral register

This is the most basic and most useful thing you can do to improve your credit score if you haven't done so already. This is essentially registering to vote. Even if you have no desire to vote, it's imperative you do this, as it's a confirmation of the address you live in.

It's almost absolutely certain that you will not be approved for any credit card if the address you put in the application is not the one you are registered to vote in. You can get yourself on the electoral register by registering to vote online.

Put your name on more of the household bills

If you share the cost of the bills with your partner or someone else at home, put your name down as the bill payer for more of them. Many people will pay their share of the bills without actually being listed as the bill payer, which will make no contribution to their credit score.

Essentially, it means there will be no record of it. Most utility bills like energy and gas show up on your credit report if you're listed as the bill payer. If you're listed as the bill payer and repay them on time regularly then this will improve your credit score.

Similarly, if you have a mobile phone contract rather than a pay as you go phone, repaying this regularly will also improve your credit score as it also shows up on your credit report.

Clear your outstanding debts

This may seem obvious, but any debts you still haven't paid can also contribute to you having a lower credit score. Build up your credit by clearing these debts as soon as possible. It will soon show up on your credit report as a repaid debt, which should contribute to your credit score going up.

Close credit cards and accounts you don't use

Do you have any credit cards in your wallet that you took out and haven't used in years? Close down any accounts that you don't use anymore. If there's no activity and you don't plan to use them again anytime soon, there's no point in having them.

This is because when lenders check your credit report they aren't just looking at how much money you owe. They are also looking at how much money you could potentially be borrowing at one time.

If you're applying for a new credit card with a limit of £3,000 and you have three other credit cards that you haven't used in years, but when combined give you a total borrowing power of £9,000, the new lender will assess what the risk is of you having access to £12,000 in credit.

They will be asking themselves, if this person were to suddenly borrow all of that money, would they still be able to repay their debt to us? So make sure any accounts you don't use are closed down as this could also look like you are desperate for even more money to borrow – if you already have credit you can borrow, why apply for more?

Check your credit report

When you check your credit report you will be able to view your financial history from the last few years and see what immediately needs to be improved.

You will also get a better idea of what aspects of your history might be problematic. Missed payments, for example? Paying off a few more bills on time could slowly rectify that issue. Perhaps just as important is to check that there are no errors on your credit report.

Unfortunate as this is, errors do happen. For example, your credit report might say you exceeded your credit limit with a particular credit card, but you know this never happened. If you hadn't checked your credit report you would have never known.

Read our guide on how to dispute your credit report to see what you can do if you spot an error in your credit report.

Can you have a credit score without a credit card?

Essentially, any type of credit is going to form the basis of your credit score. Not having a credit card or having never borrowed money in the past is likely to give you a lower than average credit score. This can be a problem for people who are young and have no credit history, or people who have never had a credit card in the past and so cannot demonstrate that they can handle credit. However, as mentioned previously, there are some basics that will go a long way to prove you can be trusted with credit.

Simply registering to vote, closing old accounts and putting your name on more of the household bills can improve your credit score. But ultimately, future lenders like to see you how you handle debt. Getting a credit card can be the easiest way of slowly easing your way into it and building up your credit score.

How do I improve my credit score with a credit card in the UK?

Many people would have heard of 'credit builder credit cards' or 'bad credit credit cards', which are essentially the same as any ordinary credit cards except they have been designed for people who have struggled to get approved for credit in the past.

This means these credit cards usually have a higher than average rate of APR and a lower spending limit to minimise the risk to the credit card provider, but to also make it easier for the customer to manage. The idea with credit builder credit cards is that the more repayments you make, the more proof there is of you being able to sensibly manage money and thus improve your credit score.

Your credit score is based on your financial history. Any debts you have repaid or failed to repay on time (or at all) will show up in your credit report.

Your credit report is what all loan providers use to check that you're suitable for their mortgage, credit card, loan, overdraft or any other type of credit product. Some future employers might also check it to see how reliable you are so it's really important to have a good credit score.

Many credit reporting companies can show you how much of your personal information is available online, and reduce the risk of you becoming a victim of identity fraud, which could be costly to your finances as well as your chances of getting credit again.

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Find a credit card designed to help you improve your credit rating.

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