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Building up a good credit score is often primarily associated with owning credit cards. But research in recent years has pointed to a trend of young people turning away from credit cards, preferring not to take on debt when they can comfortably manage spending via debit cards and online payment methods. 

According to recent data, younger people’s spending habits differentiate them from older generations when it comes to credit debt:

  • A recent report from Bank of America finds that Generation Z (born in the late 1990s to early 2010s) would rather pay using cash than by a credit card, and millennials (ages 24-40) view credit cards as too risky. A separate study by Clearpay found that young people in the UK had become more ‘credit-averse’, with 51% of millennials likely to own a credit card compared to 71% of Gen X (age 35-55).
  • Credit card debt fell at its fastest levels in 26 years in 2020, according to the Financial Services forecast report by the EY ITEM Club, with consumers preferring to make credit card repayments during the lockdowns.

Looking into this trend a bit more we've come up with some alternative ways that you can build your credit score without resorting to credit cards. 

Regularly check your credit report 

Many people only realise their credit score may impact their ability to borrow when it’s too late and they’re applying for a mortgage or looking to secure a lower insurance premium. If you can start early in adult life to consciously build up your own credit rating, then it puts you in a better position to borrow money for life’s big milestones in later life. A good first step is to check your credit report, which you can do via credit reference agencies – the leading UK sites being Equifax, Experian and TransUnion. This report will give you your credit information, even if you don’t own credit cards. Getting into the habit of checking this regularly, ideally every year, will give you a full, up-to-date picture of your creditworthiness.

Consider your car finance agreement 

Lots of people may be paying for a car through a finance agreement, and not realise that this can be an important way of adding to your credit report. If you’ve taken out a loan to pay for your vehicle and you’re paying this back in monthly instalments, then this can contribute to building your credit score. Just make sure that, as with any loan that you repay in instalments, you’ve found an agreement that works for you and that you can comfortably repay on time every month. Any agreement that takes more out of your account each month than you can realistically afford could result in a poorer credit performance, so ensure that you’ve shopped around for the best deal for you. 

Make use of rent payments 

Rent can be one of the biggest costs that people commit to every single month, for years – amounting to approximately 45.5% of people’s salary on average, and up to 75% for private renters in cities like London, according to research last year by Benham and Reeves. It would therefore be amiss to not factor it into building a strong credit score. If you’re a tenant and you can show that you’re paying rent on time, every month, then it’s worth signing up to services which can help make your credit report reflect this. Platforms like Canopy can track and record your rent payments and then report the regular payments to the leading credit referencing agencies. It’s a no-brainer if you’re a renter and you want to increase your chances of a strong credit history.

Don’t let bills bring you down 

Lots of us have various bills for utilities and contracts and this payment information can be shared with credit agencies. From gas and electricity bills, through to our mobile phone contract, these smaller regular payments could impact your credit rating if not paid on time. If you miss or default a payment it can potentially affect your chances of receiving credit later on. While it may seem obvious, it’s important that your payments are made on time – setting up a direct debit is usually the best way of ensuring this. 

Be aware of who you’re financially linked to 

When it comes to household bills, if you’re in a flat share or a home where you have a joint account to pay bills, then you should take extra care to ensure everyone is diligent with their payments. If your flat mate isn’t paying their share of the bills on time, then this could harm your credit rating. If you’re worried, then it’s best to separate your finances as strictly as possible so that there’s no risk of you being co-scored. 




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