Credit Card

Millennials: here's how to build your credit rating without getting a credit card


One in three millennials will never own their own home and will still be renting in retirement. That was the conclusion of a series of reports from the Resolution Foundation published last month.

Soaring house prices mean that for the generation dubbed “millennials”, typically defined as anyone born between the late Eighties and late Nineties, the size of a deposit, combined with the spiralling cost of renting, makes getting on the ladder a distant dream for many.

To make matters worse, despite making regular rent payments many millennials have no, or a prohibitively poor, credit rating – and this can prove a further barrier to home ownership. 

What is a credit rating?

Your credit rating tracks how good you are at borrowing money. Mortgage lenders will want to see some evidence of reliability when it comes to paying debts.

It is tracked by companies like Equifax and Experian which have access to your financial data and build you a score based on your history dealing with money. It includes information about your income and spending, past borrowing, utility bills, and more.

All lenders will want to do a credit check before you borrow money from them, so they can get an idea for how risky a proposition you are.

The problem: few first-time buyers have an extensive history of borrowing and repaying on time. Worse, some may have an unpaid bill or an issue with a joint contract from student days that means their credit rating is in shreds.

Although this may be unfair, a lack of an extensive credit history will count against you when applying for a mortgage, simply because the lender has no guarantee you will pay off the debt.

The most common way of building your score is to take out a credit card, but this can seem counterproductive to risk-averse borrowers.

Justin Basini, the CEO of ClearScore, the credit tracking agency, said: “As people look to get on the property ladder, it’s easy to stumble on the first step. By far the most common mistake people make is to not understand the impact a credit score has on the mortgage application process.

“A mortgage is probably one of the biggest financial transactions you’ll ever make, so it’s crucial to get yourself into a strong position before you start the application.”

Here are three ways to improve your score without taking on high-cost cards.

Pay your rent on time and build a score

A major frustration for young house hunters is that their rental payments don’t count for much when it comes to a mortgage application.

As many as one in seven private tenants spend more than half of their income on rent but, although lenders will see payments on your bank statement, paying on time doesn’t improve your credit score.

Last year more than 100,000 people signed a petition calling on the Government to make rental payments a consideration for mortgage lenders. The Government responded saying it was a commercial decision for lenders, but many remain frustrated.

Nurse Rachel McEnery, 27, is now in a position to save for her first property. But, by using an app to pay her rent, those payments will be used by Experian to contribute towards her credit record.

Rachel McEnery is using an app called Canopy to pay her rent which means she can build up a credit rating 

Morten Watkins/Solent News & Photo Agency

Using the app, Canopy, also meant she could start her tenancy without paying a deposit, another key issue for private tenants, and instead paid £135 for an insurance policy which will pay out to her landlord if anything should go wrong. The policy is underwritten by Hiscox.

Miss McEnery, who lives in Southampton, said: “The app can help prove you have been paying your rent on time. That was one of the things I liked, that it can help you if you want to buy a place.”

When you apply you start a “rent passport” which over time, providing you meet the payments, will give you a reliability score, which can be fed back into your Experian credit record.

Get your name on utility bills

Many young people leaving university may never have held a utility bill in their name. According to ClearScore, the credit tracking agency, successfully clearing a utility bill each month transfers to a better rating.

If you’re living with housemates at university it’s a good idea to get your name on the bills. The same will be true if you’ve recently graduated and are contributing to bills without having any in your name.

A spokesman for ClearScore said: “If you don’t have an account in your name (for example if you’re in a house share), you won’t get the boost to your credit score, even if you’re contributing to the bills. Someone is literally taking the credit for you.

“So it might be worth considering putting one or two utility bills in your name.”

Of course you still have to pay on time.

Register to vote

One lesser-known, but simple, way of boosting your credit score is to register to vote. The longer you have been on the electoral roll at your address the more it will help when you come to apply for a mortgage.

A ClearScore spokesman said: “This is because credit reference agencies are able to verify who you are, which can make you appear more stable to lenders.”

You can register to vote at


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