Credit cards can be a handy addition to your wallet, but can they help you build your credit score too?
The answer is yes – as long as you use your credit card responsibly. We take a closer look at how to do this and the benefits for your credit history.
What affects my credit score?
So how can you use your credit card to increase your credit score? Well, first we need to tell you that there is no such thing as a ‘universal’ credit score. Now, this may come as a bit of a surprise, especially as when you sign up to a credit checking agency such as Experian or Callcredit you’re given a score.
But the scores given by these agencies are all different – there’s no single score that every lender you apply to can see. These scores can be a useful guide to how good your credit history is, but all lenders can see when they carry out a credit check is a record of your borrowing activity over the last six years.
Any negative marks on your credit history, such as missed payments or defaults, will be visible to lenders. This shows them how well you’ve managed credit in the past and helps them work out whether you’ll be a responsible borrower if they lend to you. With this in mind, you should make sure your credit history is in tip-top shape.
Lenders may worry that if you have a poor credit history, you’re likely to find it more difficult to borrow. If you fall into this category, don’t worry - there are things you can do to improve your credit history.
Having a good credit history can give you a better chance of securing a credit card with a lower interest rate and higher spending limit. On the other hand, if you’ve struggled in the past with managing your payments or you’ve never borrowed, you may find it harder to successfully apply for one.
With this in mind, there are cards on the market designed for people with a bad credit history.
These cards are typically referred to as credit builder cards, as they can do just that – build up your credit history. You’ll find that these cards may have a higher interest rate and a lower spending limit. This is to make up for the increased risk the lender is taking by lending to you, and also to reduce the risk of you spending more than you can afford to repay.
Should I check my credit history?
If you haven’t done so already, it’s worth checking your credit history before applying to borrow so you have an idea of what lenders can potentially see. This way you can make sure all your information is up to date and correct.
If you do come across any mistakes, make sure you contact the financial provider involved and ask for them to be corrected. Any errors can impact applications for credit you make in the future.
And don’t forget that checking your credit history doesn’t have to cost you. You can check it for free using a free credit checking service like Noddle or ClearScore. Head here to find out more about checking your credit history for free.
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39.9% APR Representative (variable) Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender