How to build a credit score from scratch

How to build a credit score from scratch

Your credit score can affect many things, including buying a house and taking out a loan. Therefore, it is important to have a good rating. But what do you do if you don’t have a credit score at all?

Throughout this guide, we will discuss how to boost your credit score from nothing.

What is a credit score?

A credit score is a rating based on your credit history. It essentially highlights how good you are with money, particularly paying back the money you have borrowed. This score is what banks and other lenders use to assess the risk factor of taking you on-board financially from opening an account with them to loaning you money.

The better your score, the higher your chances of your application being accepted, and the better rates you can be offered.

How to build your credit score from scratch

If you have no digital trail of your finances, such as you have never opened an account before or had a credit card, then you won’t have a credit score at all. Here are a few ways of building your credit score from scratch.

1. Open a current account

Opening a current account is beneficial in a number of ways as long as you use it responsibly. It can show that you have an income and will start a digital trail as you make payments either online or with a debit card. This can show that you have a responsible relationship with a bank. Creating a digital trail may sound daunting, but it is the start of building a credit history.

Some of the key benefits of opening an account are:

  • A safe and secure place to store your money
  • More options for making payments
  • Easy way to manage your finances
  • Build your credit score

2. Make sure you are on the electoral roll

This may seem like a strange one, but if you are eligible to vote, then being on the electoral roll can benefit your credit score. It allows lenders to verify who you are, ruling out any instances of fraud, and proves you have a permanent address.

3. Verify your identity on credit report tools if you are not eligible to vote

If you aren’t eligible to vote, don’t worry. You can still verify who you are with credit report tools, like Experian and Equifax by sending them your documents to provide proof of your identity and your address.

4. Pay your bills in your name

Having bills in your name and paying them on time is one of the best ways you can show lenders that you are capable of paying back what you owe. This will help to increase your credit score and provide evidence that you are a low-risk customer, boosting your chances to be accepted.

5. Start using Direct Debits and standing orders

Setting up Direct Debits and standing orders are an easy way to ensure your bills are paid on time. Once you have set them up you don’t have to worry about when your bills are due, all you need to do is make sure there is money in your account.

6. Consider a credit builder card

A credit builder card is essentially a prepaid card with a loan that you pay back monthly. It is designed for those who have a low or no credit score. The product often comes with a fee, but it does not require a credit check. This can be a good way to show that you can pay the money back that you have borrowed to help boost your credit score.

7. Pay all bills on time

Paying your bills in full on time can show lenders that you are financially secure and that you can manage your account effectively. If you only pay the minimum each time or miss payments and incur bank charges, this will affect your credit score negatively.

As soon as you have started to build your credit rating, check out our guide on how to improve your score.

Learning how to budget your money is also great way to help build your score. For tips on how to do this, check out our budgeting hub.