Building your credit history for the first time can seem like a daunting task, especially when you're just starting out in the world of personal finance.

However, understanding what a credit history is and why it's crucial to build a good credit report and score is the first step towards securing your financial future.

What Is a Credit History?

Your credit history is essentially a record of your financial behaviour, and it plays a vital role in helping lenders decide whether to grant you credit. 

Think of it as a grading system based on various factors that ultimately give you a credit score. Lenders consider four primary aspects:

Payment History: How consistently and punctually you pay your bills.

Credit Utilisation: The percentage of your available credit that you're using.

Credit History Length: How long you've been using credit.

Credit Inquiries: How often you apply for credit.

It's important to note that having no credit history can be just as detrimental as having a poor one. Both scenarios can hinder your financial progress.

Various entities, including banks, mortgage providers, potential employers (for certain job types), utility companies, mobile phone providers, landlords, creditors, debt collection agencies, insurance companies, and government agencies, have access to your credit report. They examine this information to determine whether you're responsible with borrowing and repaying money.

For instance, even something as seemingly simple as having a mobile phone contract is a form of borrowing money. The phone shop sells you a device that you repay in instalments, which is essentially a loan.

When you're looking to rent a home, landlords and letting agents often conduct credit checks to assess whether you've had difficulties paying bills in the past. So, building and maintaining a good credit history early on can be highly beneficial.

How to Build and Maintain a Healthy Credit History

Check Your Credit Scores 

There are three major credit reference agencies in the UK: 

Experian (available through The Credit Club, 

Equifax (accessible through Clearscore.com)

TransUnion (available via Creditkarma.co.uk). 

It's essential to check all three scores and track them over time. If you are just starting out, you may find that it doesn’t recognise you.  This is frustrating and puzzling but take a deep breath and just know that you are now entering into the game of “let’s get this working”.  Follow the same steps below, and also do whatever the credit reference agency asks of you to get you on their list.  For example, they may ask for a copy of your birth certificate or tax history.  This is all doable.  It is a pain in the backside but you can do this and when it is done, you won’t have to do it again.  It can take a few months to complete this and it is an important task to stick with, breathe and win!

Ok let’s get going…

Register on the Electoral Roll

This takes only a few minutes and should be your top priority.

Pay All Bills on Time

This includes electricity, gas, phone, rent, and loans (except student loans).

Ensure Rent Payments Are Reported

If you pay your rent on time, consider using a third-party service like Credit Ladder or Loqbox to report your payments on your credit report. 

Loqbox also offers additional free services, such as Loqbox Spend and Save which is 

Get a Credit Card and Use It Wisely

Use your credit card for purchases but treat it like your own money.

Always pay the full balance at the end of each month to avoid hefty interest charges and late payment marks on your credit report.

Space Out Credit Applications

Every time you apply for credit, it leaves a footprint on your credit report. 

Avoid applying for multiple forms of credit within a short time frame, such as a phone contract and a credit card in the same month.

Exercise Patience

If you're declined for any form of credit, wait at least a month before reapplying.

Avoid Certain Financial Moves

Steer clear of withdrawing cash with your credit card, taking out payday loans, or using "buy now, pay later" schemes.

Don't Rely on Credit Repair Services

These services often offer no more information than what you can find here.

DON’T Close Unused CREDIT Cards

Keeping unused credit cards open can be a smart move for your credit score. Closing them might reduce your available credit, increasing the percentage of credit you've used, which can hurt your score. For example:

- Card one: £5,000 limit, £2,500 used (50% usage)

- Card two: £5,000 limit, paid off (0% usage)

- Total: £10,000 credit, £2,500 used (25% usage)

If you close card two, your credit usage jumps to 50%. Aim to stay under 30% usage if possible.

DO Close Unused STORE Cards

While it may seem advantageous to have unused credit available, having multiple store cards isn't necessarily a good thing. Consider closing these accounts.

Review Your Credit Report

Regularly check the details on your credit report to ensure accuracy.

It's crucial to note that you don't need to pay for your credit report. While Equifax and Experian may encourage you to sign up for monthly subscriptions, you can check your credit report yourself regularly for free.

Navigating the financial world might seem complex, but building and maintaining a healthy credit history is a crucial step towards financial stability. 

If you have questions or need further assistance, please don't hesitate to contact me. I'm here to help you on your financial journey.