When you formally apply for a credit card, the lender performs a hard credit check. This is recorded on your report and can cause a small, temporary dip in your score. To protect your rating, it is best to use eligibility checkers first and avoid making multiple formal applications in a short space of time.
Want to build your credit score? A credit card can be a powerful tool when used responsibly. Learn how to improve your history for a better future.
The information in this article is provided for general educational purposes only and should not be taken as financial advice. Everyone’s financial situation is different, and you should always consider seeking guidance from a qualified independent financial adviser or free, impartial organisations such as MoneyHelper or Citizens Advice before making decisions about credit or borrowing
Introduction to Credit
Building credit is a crucial step toward achieving financial stability and unlocking opportunities for your future. Your credit history, as recorded in your credit reports by the three major credit bureaus, gives lenders a picture of how you manage your finances.
Lenders, landlords, and even some employers may review your credit reports to assess your trustworthiness. A good credit score can help you qualify for lower interest rates on loans and credit cards, making borrowing more affordable and giving you greater financial flexibility. By understanding how credit works and making smart choices, you can start building credit and work toward a good credit score that opens doors to better financial options.
Choosing the Right Credit Card
Selecting the right credit card is an important decision on your credit building journey. With so many credit cards available, it’s wise to compare features like interest rates, annual fees, and credit limits before applying. If you’re just starting out or have a low credit score, secured credit cards can be a great option – they require a security deposit and are designed to help you build credit responsibly.
Student credit cards and store credit cards often have lower credit limits and can be easier to qualify for, making them useful tools for establishing credit history. As you review your options, pay close attention to the credit utilisation ratio, which is the percentage of your available credit you’re using. Keeping this ratio low is key to building credit and maintaining healthy credit scores.
It all starts with consistent payments
The most significant factor influencing your credit score is your payment history. Lenders want to see that you are a reliable borrower who pays back what you owe, on time. Making your credit card payment every month, even if it’s just the minimum, is a crucial first step. Consistently making payments on a monthly basis shows responsible credit behavior and helps build a positive credit history.
Setting up a direct debit or automatic payments can be a simple way to ensure you never miss a payment and always meet your due dates. Making on time payments and ensuring your accounts are paid as agreed is essential for maintaining and improving your credit score. Missed payments can have a significant negative impact on your credit score and may make it harder to qualify for credit in the future.
Keep your credit utilisation low
Credit utilisation is the percentage of your available credit that you are using. For example, if you have a credit card with a £2,000 credit limit and a balance of £1,000, your credit utilisation is 50%. This ratio is calculated based on your total available credit across all your credit card accounts.
High credit utilisation can be a red flag to lenders, as it might suggest you are over-reliant on credit. A lower utilisation rate, generally below 30% of your total available credit, is viewed more favourably and can positively impact your credit score. If you’re managing multiple credit card accounts, it’s important to keep your overall utilisation low and make timely payments to maintain a healthy credit score. If you’re managing multiple credit card accounts, you’re likely skilled at handling your finances, but may find that simplifying things could be beneficial. Consolidating your balances can be an effective way to lower your overall credit utilisation and make your finances easier to manage.
The power of paying more than the minimum
While paying the minimum amount on your credit card keeps your account in good standing, it can be a slow and expensive way to clear your balance. Interest can accumulate, making it feel like you’re treading water. Only making minimum payments can result in high interest rates and even higher interest rates over time, significantly increasing the total amount you owe.
Whenever possible, aim to pay more than the minimum. Consider making small purchases that can be easily paid off each month. This not only reduces the overall interest you’ll pay but also demonstrates to lenders that you are actively working to manage your debt. This is a powerful signal of financial resilience – the ability to bounce back and move forward.
Avoiding Common Mistakes
When building credit, it’s important to steer clear of common pitfalls that can lower your credit scores. Late payments, high credit card balances, and applying for multiple credit cards in a short period can all hurt your credit. To avoid these setbacks, always make on-time payments, keep your credit card balances low, and limit new credit applications.
Be mindful of interest rates and fees, as carrying a balance can lead to debt and high interest charges. By practicing good credit habits and using credit cards wisely, you can avoid damaging your credit and set yourself up for long-term financial success.
Credit Reporting and Errors
Errors on your credit reports can have a significant impact on your credit scores, so it’s important to review your reports from the three major credit bureaus regularly.
If you find any inaccuracies, contact the credit bureaus directly to dispute and correct them. Keeping your credit history accurate ensures that your credit scores truly reflect your financial behavior. It’s also helpful to understand the difference between soft inquiries, which don’t affect your credit scores, and hard inquiries, which can lower your scores if you have too many in a short period. By staying proactive and monitoring your credit reports, you can maintain good credit and avoid issues that could affect your financial future.
How Updraft can support you
We believe in creating clear paths forward, with less stress and more control. For many, credit cards and overdrafts can feel like a revolving door of debt. Updraft is designed to help you break that cycle. As a lender, Updraft supports you by consolidating your existing debts into a single, straightforward Pay Off Loan (subject to status & affordability – when consolidating existing borrowing, you may extend the term of your debt and increase the total amount you repay).
These types of loans, along with other credit building tools, can help diversify your credit mix and improve your credit score by reporting regular payments to credit bureaus. By consolidating your debts, you can see a clear end date for your repayments. This isn’t just about clearing what you owe; it’s about reclaiming your power and building a more secure financial future.
Discover more practical tips to build a stronger financial profile. Check out our Credit Scores page to find out more ways to improve your credit rating.
Final Thought
Looking to pay off credit card debt? If you’re looking to consolidate credit card debt and cut down on high interest, check your eligibility for Updraft, or download our app today.
Loans from 15.3% APR (25.9% APR Representative)
25.9% APR Representative based on a £10,000 loan over 60 months at 20.40% fixed interest p.a. Monthly repayment: £283.20. Total repayable: £16,992 (inc. £600 fee). Subject to status and affordability. Consolidating debt may increase the term and total amount repaid. All figures are representative and based upon an assessment of credit and affordability. Terms and conditions apply.
From 15.3% to 41.2% APR, £1,000–£25,000, over 2–5 years available.
Updraft Awards & Recognition
Recognised for helping borrowers take control of card debt.
Frequently Asked Questions
Does simply applying for a credit card lower my score?
What is the '30% rule' for credit utilisation?
Credit utilisation is the percentage of your total credit limit that you are actually using. Lenders generally view a utilisation rate below 30% as a sign of responsible management. If your balances are higher than this, it can signal to lenders that you are over-reliant on credit, which may lower your score.
Why is paying only the minimum amount risky?
While paying the minimum keeps your account in good standing, it is a very slow and expensive way to clear debt. High interest rates mean much of your payment goes toward interest rather than the balance itself. Aiming to pay even a small amount over the minimum helps reduce interest costs and shows lenders you are in control.
How can Updraft help me break the credit card debt cycle?
Updraft helps you move from the "revolving door" of credit card debt to a clear path forward. By consolidating your balances into a single Pay Off Loan, you can lower your overall credit utilisation and replace multiple due dates with one simple payment and a fixed end date.