Best ways to build credit scores for young adults

A ‘young adult’ is somebody between the ages of 18 and 26. It’s an exciting time in your life when you step out from under your parents’ or guardians’ wings and start taking on adult responsibilities, like building your financial independence. If you’re looking at ways to build credit, Loqbox’s credit guide for young adults is here to help.

What is a typical credit score for young adults?

Your credit score is a number that summarises your credit report which is largely based on your borrowing history from age 18. It gives you an idea of how ‘creditworthy’ potential lenders consider you to be. 

Lenders don’t actually consider your credit score (which is a tool for you to use), but they do look at your credit report when you formally apply for credit like a loan, mortgage, or a credit card. These financial agreements result in a hard credit check being done - you can read more about those here.

If you’re wondering what a good credit score for young adults is, especially as credit history only starts at 18, you’ll be pleased to hear that there isn’t a beginner score. You don’t start at zero. In fact, the average credit score for 18-20 year olds is often quite high (823 according to Experian, Oct 2021),  because generally you don’t have any financial responsibilities yet.

But your credit score could drop significantly as you get older if you don’t take care of it. Your credit score reflects the history of how you manage your credit and borrowing over time. So it’s important to know the best way for a young person to build credit to make sure you start on the right foot. You can read more about credit scores, how they work and what affects them, here.

Establishing credit scores for young adults can be done for free and without impacting it using these great sites:

ClearScore (uses Equifax data)*‍

Experian App (uses Experian data)

‍Intuit Credit Karma (uses TransUnion data)‍

*For transparency, we wanted to let you know that ClearScore pay us a small commission if you sign up using this link.

Why building credit for young adults matters

Your credit score is the key to unlocking your financial goals. If you’re dreaming of one day owning a house, buying a new car, or achieving financial freedom and wellbeing, your creditworthiness and ability to be accepted for credit can have a significant impact. And it's not just about getting accepted. You also need to get the best interest rates.

With large loans, like mortgages, getting the best interest rates can literally save you £1,000s over the lifetime of your borrowing. Having a good credit score and being trusted by lenders before applying will help you to get the best rates. So, how can young adults build credit as they navigate their path to financial independence?

Best ways for a young person to build credit

Follow Loqbox’s credit guide for young adults to get a head start on building a great credit score and setting off on your journey to financial freedom.

Start with a solid foundation

A great way to show potential lenders that you’re a responsible adult is to let them know you’re a real person with financial responsibilities. It may sound obvious, but open a bank account and register to vote. While bank accounts don’t directly impact your credit score unless you’re borrowing money from them, you need somewhere to manage your money.

The electoral roll is a list of everybody who is eligible to vote in the UK. The credit reference agencies (Experian, Equifax and TransUnion) look at it to establish your identity and address when generating your credit report (and score).  

You can opt out of the ‘Open Register’ (or ‘Edited Register’ in Northern Ireland) if you don’t want your information to become public, without this affecting your credit score. And if you’re unable to register to vote, you can ask Experian, Equifax and TransUnion to pop a note on your credit files to explain why – giving lenders a chance to take this into consideration.

Both of these things are relatively easy to do, so get them sorted as soon as possible. 

Make payments in full and on time

Consistency of positive money management is key to a better credit score. Always make sure your payments, from credit cards to energy bills, are always paid in full and on time. If you fail to meet your financial commitments you run the risk of damaging your credit score, and just one missed payment will stay on your credit file for six years (although this does matter less as time goes on). Read all about how missed payments affect your credit score here.

If you’re worried about remembering all of your payments, use handy bank tools. Direct debits and standing orders are great for taking care of financial commitments. Just set them up once and they deal with your monthly obligations. A great tip is to organise payments to come out on payday so that your bills are sorted before you can even be tempted to spend the money!

Use credit (responsibly)

Of course, one of the best ways to prove to potential lenders that you are responsible with credit is to use it. Your credit score loves it when you use credit properly — make your repayments, and don’t overspend. But how can you get accepted for credit in the first place? Our credit card guidance for young adults should help.

Without an established credit history, it can be challenging to get a credit card. But there are options. There are student credit cards and credit-building credit cards that are designed for people without much credit history, but it’s important to note these may have higher interest rates as they may be seen as ‘higher risk’ than standard credit cards. 

It’s also important to not apply for too many new credit agreements within a six-month period. If you’ve been declined, it’s better to stop and wait a few months before reapplying. This is because when you apply for credit, the lender will do a hard credit check on you. These can give your credit score a temporary dip which takes about six months of responsible credit behaviour to rebuild. So choose your options carefully and don’t make lots of applications at the same time. 

Keep your credit utilisation in check

Credit utilisation is the amount of your total available credit (across all credit accounts) that you’re using at any one time. 

So if you have £2,000 credit available and you are using £1,000 of it, your credit utilisation rate is 50%. Try to maintain a credit utilisation rate of no more than 25% to show that you can borrow responsibly and aren’t relying on credit too heavily.

Get started with Loqbox

We’ve got some easy options to help you build your credit rating while managing your finances responsibly and learning all you need to know about the financial system. 

If you’re starting out on your financial journey, one of the best ways to build credit for young adults is by getting started with Loqbox. For just £2.50 per week (less than a cup of coffee), you can get access to all of our powerful credit-building tools. 

Get an interest-free credit account with Loqbox Grow to pay your membership with and show that ‘low credit utilisation’ we mentioned earlier. Make your rent count towards your credit history by using Loqbox Rent. And improve your credit score while you save a pot of money towards your financial goals with Loqbox Save. 

We report all of your payment activity to help  boost your credit rating and our members have seen their scores rise by 300 points in the first three months of using these brilliant tools together.

Improvements to your credit score are not guaranteed.