How do I use a credit card to improve my credit score?

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

• Missing payments or maxing out your spending can lower your score

• Review other means of improving your credit score too, such as getting on the electoral roll

Can a credit card help build my credit score?

Yes, a credit card can help build your credit score if you use it responsibly. The main benefits come from showing lenders that you can borrow small amounts, make payments on time, and keep your balance well below your credit limit.

However, a credit card can also damage your credit score if you miss payments, regularly max out your limit, or take on debt you cannot afford to repay.

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:

• Use an eligibility checker when you apply: Too many credit applications over a short period can harm your credit rating, but by using an eligibility checker you can see the likelihood of being approved for your chosen card before you apply

• 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.If possible, clear the entire balance monthly to avoid paying interest.

• Only using a portion of your available credit: Keeping your credit utilisation low shows lenders you're not overly reliant on credit. As a general rule, try to use no more than around 30% of your available credit, although lower is often better. Credit utilisation is the percentage of your available credit that you're using.

• Not exceeding your credit limit: Going beyond your credit limit can lead to declined transactions and credit card fees as well as having a negative impact on your credit score. It’s often good practice to set up an alert so you’re aware when you get close to the card limit.

• 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 and interest from the moment of withdrawal, but is often seen as a red flag by credit agencies.

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.

Which credit card should I choose to build credit?

Any credit card can improve 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.

Manage your credit card responsibly to avoid these pitfalls. If you know you are prone to overspending and have struggled to manage debt in the past then applying for a credit card might not be the right step.

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. If you no longer have a financial connection, make sure any outdated links are removed from your credit report.

• Register to vote: Being on the electoral roll helps lenders confirm your identity and address, which can improve your chances of being accepted for credit. 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. There is no set timeframe, as it depends on your starting point, the actions you take and how your credit history is reported.

Some positive changes, such as correcting errors on your credit report or registering to vote, can have an impact relatively quickly. However, building a stronger credit profile through responsible borrowing and consistent repayments usually takes several months or longer.

The key is to maintain good financial habits over time. You can monitor your progress with our free credit reporting service, Credit Score, which also offers tips to help improve your score.

Kara Gammell
Personal Finance & Insurance 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:

• Getting your first credit card

• Advantages and disadvantages of credit cards

• Easy to get credit cards

• What is a credit report?

• How credit reference agencies calculate your credit rating

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, we’ll show you credit cards that match your needs, including cards you’re most likely to be accepted for. We’ll show you a list of key features including the interest rate and any perks to help you make the right decision. 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.

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.