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There's no short cut to building a good credit report: lenders like to see a long history of reliable borrowing behaviour.

But that doesn't mean the long route can't get a boost: taking out a credit card and using it sensibly (that is, without missing payments or exceeding the credit limit) is one good way to start improving a credit score.

In this guide we'll look at what 'building credit' really means and which credit cards can help to improve a credit score.

Credit building: the basics

'Credit building' is a bit of a misnomer. Your credit report isn't a mountain you have to climb with a 'perfect' score waiting somewhere up in the clouds. There are two reasons for this.

First, everyone's using different methods to see your credit history. Your long-term bank will have access to more information than a new lender and even they might use different credit reference agencies to another completely new lender.

Second, lenders accept and reject applications based on profit as well as risk. So even those we might regard as 'perfect' (long history, never paid interest) can be rejected because they're not what a lender is looking for.

But all that doesn't mean there's no point trying to improve a credit profile, there are still better and worse histories and things you can do to get them - just no definite answers.

For more on how to repair status in general see our repair your credit rating guide or take a look at our guide on obtaining your credit report for more on getting an overview of your history.

In general, though, a stable history of borrowing is key.

Why credit cards?

Having a current account overdraft, paying 'contract' bills like pay monthly mobiles and, of course, other borrowing such as personal loans can all be taken into account as part of a credit history so why build up a credit history with cards in particular?

There are three reasons.

1. Regular borrowing

A credit card is a form of regular borrowing that doesn't have to cost anything.

You could have one for years and, as long as you paid the balance in full every statement period, never pay a penny.

In contrast, having an arranged overdraft is, these days, no guarantee that you won't be charged interest and/or fees for borrowing and is, in any case, a less clear-cut form of borrowing.

2. Easy(ish) to increase and decrease credit limits

As long as it doesn't tempt you into expensive borrowing, having a large credit limit can be useful in credit score terms: it looks good to have a prior acceptance and a proportionally small amount of borrowing, as opposed to being maxed out.

On the other hand, some people worry that having too much available credit can actually be harmful when they're looking to borrow elsewhere since lenders get nervous about all the borrowing potential at the applicant's disposal already.

Since most credit cards are easier to close or ask for a credit limit reduction on than almost all other financial products, they're useful in this respect too.

3. First step for poor histories

Most 'poor history' and, increasingly, 'no history' borrowing options are expensive, just look at payday loans.

However, as we noted above, credit cards can be used for free and, as we'll see below, lenders are increasingly specifically targeting those looking to re-build a damaged credit history.

Some lenders even accept those who have had serious debt problems such as County Court Judgements for non-repayal of debt (CCJs) or bankruptcy in the past.

Credit building cards

As we've seen, there are rarely specific credit card features which make deals good for credit building: just using the card responsibly over a long period of time is enough.

Nevertheless, even those with good histories - and especially those with only no bad history - should pay close attention to the application criteria before submitting their details.

If a credit application is rejected, the rejection is recorded as an application search on credit reports and can be seen by other lenders so making another application straight away is ill-advised.

Our full guide has more information on the right to information and what next steps to take when a credit card is rejected.

First time credit card users should be particularly careful.

See our best first credit card guide for more on that.

Credit re-building

As we noted above, there are also select number of credit cards in the market designed especially for those new to credit without profiles as well as those with past credit problems who may have difficulty obtaining mainstream credit.

However, these cards carry very high rates of interest - typically double that of mainstream credit cards - so they should be used carefully.

With interest rates this high while the limits are often only small, it's still worthwhile ensuring only spend that would otherwise be made in cash or a debit card is put on the account so there is always money to clear the balance in full.

Poor history credit cards

Capital One and Barclaycard offer some of the best 'poor credit' cards in terms of offering the nearest services to mainstream deals.

Barclaycard Initial credit card
	Barclaycard Freedom rewards, purchase delivery insurance and identity protection service.	Apply here »
Representative Example: 29.9% p.a. variable on purchases. This is equivalent to 29.9% APR representative variable based on a credit limit of £1,200. Barclays Bank, 1 Churchill Place, London, E14 5HP.

Capital One Classic credit card
	Purchase protection insurance and identity theft assistance.	Apply here »
Representative Example: 34.94% p.a. variable on purchases. This is equivalent to 34.9% APR representative variable based on a credit limit of £1,200. Capital One (Europe) plc, Registered Office: Trent House, Station Street, Nottingham, NG2 3HX.

Vanquis is another well known option, while their cards are much more basic they still offer anything extended under law - such as Section 75 purchase protection, except that Vanquis doesn't subscribe to the Lending Code, which offers guidelines against fraud liability.

You can see more poor score credit cards here.

Prepaid cards

For people who've had really serious debt problems who doubt they'll be able to get a credit card at all, the CashPlus Prepaid card with creditbuilder is an alternative. There's no credit check, creditbuilder customers just need to supply proof of UK residence and proof that they're over 18.

They then make twelve monthly payments to hold the card - £4.95 a month - which appears as a fully repaid loan on an Experian credit report.

Most banks and utility companies do an Experian check so it's a good way to build credit even without a credit card.

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