How Millennials and Gen Z Can Build Credit Early: A Practical Guide

Building credit early is one of the smartest financial moves Millennials and Gen Z can make. A strong credit history not only helps with borrowing but also impacts your ability to rent a flat, get a mobile plan, or even secure a job. Unfortunately, many young people in the UK overlook the importance of credit until they need it.

This guide will walk you through why building credit is crucial, how to start, and how to maintain a healthy credit profile.

Why Credit Building Matters for Young People

Credit scores aren’t just for loans and credit cards—they play a key role in your everyday financial life. Here’s why starting early is important:

• Access to Better Financial Opportunities: A good credit score can lead to lower interest rates on loans and credit cards.

• Independence: Landlords and utility companies often check your credit history before approving applications.

• Long-Term Benefits: The earlier you start, the more time you have to build a strong credit profile.

Ignoring your credit until you need it can lead to limited options or higher costs when it matters most.

How Credit Works in the UK

In the UK, credit scores are maintained by three main agencies: Experian, Equifax, and TransUnion. These agencies gather data on your borrowing and repayment habits, including:

• Payment history.

• Credit utilisation (how much of your credit limit you’re using).

• Length of credit history.

• Types of credit you use.

• Recent credit applications.

Each agency calculates scores slightly differently, but the general principles remain the same: responsible borrowing and timely payments lead to better scores.

Steps to Start Building Credit Early

1. Open a Bank Account

While a bank account doesn’t directly affect your credit score, it’s a starting point for managing your finances. Choose an account that offers online banking and budgeting tools to help track your spending and avoid overdrafts.

2. Get a Credit Builder Card

A credit builder card is specifically designed for people with no or limited credit history. These cards typically have higher interest rates, so it’s crucial to pay off the balance in full each month to avoid extra charges.

How it helps:

• Demonstrates your ability to manage credit responsibly.

• Builds a payment history, one of the most important factors in your credit score.

3. Use a Credit-Building SIM Plan

Services like Boshhh Mobile offer SIM-only plans that report your monthly payments to credit agencies. Regular, on-time payments show lenders that you’re reliable.

Benefits of Boshhh Mobile:

• Affordable monthly plans designed for credit building.

• Helps establish a credit history without taking on debt.

• No need for a traditional credit card or loan.

4. Pay Bills on Time

Your payment history is one of the most significant factors in your credit score. Whether it’s your mobile plan, utilities, or subscription services, always pay on time. Setting up direct debits ensures you never miss a payment.

5. Register on the Electoral Roll

Being registered to vote in the UK boosts your credit score. It helps lenders verify your identity and address, making you a more trustworthy borrower.

6. Limit Credit Applications

Every time you apply for credit, it leaves a “hard search” on your file, which can temporarily lower your score. Before applying, use an eligibility checker to see if you’re likely to be approved without affecting your credit score.

Tips for Maintaining a Healthy Credit Score

Once you’ve started building credit, it’s important to maintain it. Here’s how:

• Monitor Your Credit Report: Regularly check your credit report for errors or fraudulent activity. Services like Experian and ClearScore provide free access.

• Keep Your Credit Utilisation Low: Aim to use less than 30% of your credit limit. For example, if your limit is £1,000, try to keep your balance below £300.

• Avoid Missing Payments: A single missed payment can harm your score and stay on your record for six years.

• Don’t Close Old Accounts: The length of your credit history matters, so keeping older accounts open can benefit your score.

Common Myths About Credit Scores

Many young people fall for misconceptions about credit. Let’s debunk a few:

• Myth: You need to carry a balance on your credit card to build credit.
  Fact: Paying off your card in full each month is better for your credit score and avoids interest charges.

• Myth: Checking your credit score lowers it.
  Fact: Viewing your own score is a “soft search” and doesn’t affect your credit.

• Myth: Only loans and credit cards impact your score.
  Fact: Services like Boshhh Mobile and utility accounts also contribute to your credit history.

The Benefits of Starting Early

The sooner you start building credit, the more time you have to establish a strong financial foundation. Starting in your 20s means you’ll be well-prepared for major life events, such as:

• Renting a flat.

• Buying a home.

• Starting a business.

Building credit early also means you’ll have time to recover from any financial missteps.

Final Thoughts

For Millennials and Gen Z, building credit is about more than just borrowing—it’s about securing financial freedom and independence. By taking simple steps like using a credit builder card, paying bills on time, and opting for services like Boshhh Mobile’s credit-building SIM plans, you can start building a strong credit profile today.

Don’t wait until you need credit to think about your score. Explore our credit building SIM plans - a brighter financial future and foundation starts with Boshhh Mobile.