How to use a credit card to improve your credit score
Looking to boost your credit score but not sure where to start? This guide explains how finding the right credit card can help increase your credit rating
Key takeaways
A higher credit score leads to better loan terms and lower interest rates
There are credit cards specifically designed to help build your credit score
Irresponsible use (Missing payments or maxing out your spending) can lower your score so try to manage your credit card responsibly
Check linked accounts (joint accounts affect your score)
Why do I need a strong credit score?
A good credit score is the cornerstone of your financial profile. It influences the likelihood of you being approved for borrowing money, as well as the amount you can borrow and the interest rate you'll be charged.
A higher credit score signals to lenders that you're a responsible borrower, which can lead to more favourable loan terms and lower interest rates. This can save you significant amounts of money over time.
Providers of mortgages, loans, credit cards and even mobile phone contracts will all check your credit score, before offering you a deal.
Bad credit can also affect your car finance deal, so the better you handle your finances (and the higher your credit score), the easier and cheaper it is to function in day-to-day life in the UK.
How can I build my credit score with a credit card?
One of the most effective tools for building your credit score is a credit card. When used wisely, it can significantly enhance your creditworthiness and help repair your credit rating.
Here are some best practices for using a credit card to build your score:
Paying off the balance on time: Ensure you never miss a payment by setting up a direct debit for at least the minimum payment due each month
Paying off the balance in full: If possible, clear the entire balance monthly to avoid paying interest
Not exceeding your credit limit: Stay well within your credit limit to avoid fees and negative impacts on your credit score
Only using a portion of your available credit: Aim to use less than 30% of your credit limit to show lenders you're not overly reliant on credit
Avoid withdrawing cash: Using your credit card in an ATM is not only likely to incur expensive charges but is often seen as a red flag by credit agencies
Which credit card should I choose to build credit?
Any credit card can be a vehicle for improving your credit rating, provided it's used responsibly. However, there are cards specifically designed for this purpose. These are:
Credit builder cards: Typically have low credit limits and high APRs, encouraging you to borrow small amounts each month and pay back in full
Credit cards for bad credit: Aimed at people with poor or no credit history who need to borrow, often at short notice
Balance transfer credit cards: Allow you to consolidate debts and give you breathing room through extended interest-free periods
Before applying for a card, it's wise to use our credit card eligibility checker to see your likelihood of approval and where you're pre-approved, which can prevent unnecessary hard enquiries on your credit report.
Can a credit card reduce my credit score?
Simply having a credit card does not reduce your credit rating. However, lenders do take into account your existing debt when considering new credit applications.
Irresponsible use, such as missing payments or maxing out your card, can certainly lower your score. It's crucial to manage your credit card responsibly to avoid these pitfalls.
Additional ways to build your credit score
Beyond credit card use, there are other strategies to improve your credit rating:
Check any linked accounts: Your credit score could be impacted by joint accounts with someone who has poor credit.
Register to vote: Your credit approval chances are better if you're on the electoral roll. Registration is simple on the GOV.UK website.
Paying bills on time: This demonstrates to lenders that you're a reliable borrower.
Check for errors: Ensure your credit report is accurate by updating personal information and disputing any inaccuracies.
Existing debt: Focus on paying down current debts before taking on new credit.
How long does it take to improve my credit score?
Improving your credit score is a marathon, not a sprint. Responsible financial behaviour will gradually enhance your score and you can monitor your progress with our free credit reporting service Credit Score, which also offers tips for improvement.
Remember: it's the consistent, disciplined approach that will yield results.
Personal Finance Expert
Our expert says
“Even if you are earning well and you’re confident that you’ll be able to meet all repayments for any borrowing, you could still be held back by a low credit score.
"This is why it’s worth checking your score asap, and then taking steps to improve it as necessary. Used responsibly, a credit builder credit card could be part of this solution.”
Other useful guides
For more insights into credit cards, explore our additional guides:
Compare credit cards with MoneySuperMarket
Finding the right credit card is easy when you compare with MoneySuperMarket. First, you’ll need to tell us a little about yourself and your financial situation, including information on your employment, income and what you’ll be using your new credit card for.
From there, you’ll receive a list of credit cards that match your needs. We’ll even show you which cards you’re most likely to be accepted for if you apply with our credit card eligibility checker. This way you reduce the risk of being rejected and keep your credit rating in good shape. Searching and comparing in this way won’t affect your credit score in any way.
Once you’ve found the card you want, just click through to the provider to finalise your application. At this point, the lender will conduct a ‘hard credit check’ on you.
Once you’re accepted for a card deal you’ll be told your credit limit. As soon as your card arrives in the post you just need to activate it – then it will be ready to use.
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.
