A first credit card can help build your credit score, but how you use it matters. Here's what ClearScore data shows makes the biggest difference in your first year.

Key takeaways

• Your first credit card can help build your credit score because on-time payments and well-managed borrowing are added to your credit report, usually once a month.

• Paying on time appears to matter most. First-time cardholders in ClearScore data who never missed a payment saw their scores rise on average, even when they used a high share of their limit.

• First-time cardholders who kept their balance low and never missed a payment saw the largest average rise in ClearScore data, at 165 points over 12 months. This shows an association, not a guarantee, and many factors affect scores.

• Paying your full balance each month means you won't pay interest on purchases, and it keeps the share of your limit you're using low.

• A missed payment can stay on your credit file for six years, so a direct debit for at least the minimum repayment is a simple safety net.

Can your first credit card build your credit score?

Yes, it can. Your card provider shares how you manage your account with the credit reference agencies (CRAs), the companies that hold your credit report. Most lenders update this information once a month, so every month you pay on time adds another positive entry to your credit history.

Disclaimer: agencies compile credit reports and may produce different scores, while lenders use their own criteria and may calculate or interpret scores differently.

So when it comes to how to use a credit card to build credit, it really comes down to two habits: paying on time every month, and keeping your balance well below your credit limit. MoneyHelper notes that a credit card can help improve your credit rating if you never spend more than your limit and always repay on time.

If you haven't applied yet, our guide to getting your first credit card covers eligibility and applications, and our tips on choosing a card can help you compare options. This guide picks up once the card is in your hand.

What should you use your first credit card for?

The best way to use a credit card for building credit is on small, planned purchases you'd make anyway and can pay off in full. A mobile phone bill, a streaming subscription or part of your weekly food shop all work well.

Before you start, it helps to know the terms you'll see on your statement. For a wider introduction, read our credit card basics guide.

Here's an illustrative example. Say your limit is £500. You spend £100 on your phone bill and some groceries, and your direct debit clears the full £100 by the due date. You've used 20% of your limit, paid no interest on those purchases and added a month of on-time payments to your report. This is an example only, and terms vary between cards.

Avoid using your card to take out cash. Cash withdrawals on a credit card are expensive, according to MoneyHelper, usually with a fee each time and interest charged even if you repay your balance in full.

Only spend what you know you can pay back. Always make sure you can afford repayments.

Which matters more: paying on time or keeping your balance low?

Paying on time appears to matter most, but the strongest results come from doing both. ClearScore tracked around 240,000 people through their first 12 months with a credit card, grouping them by how much of their credit limit they used (known as credit utilisation) and whether they missed any payments.

First-time cardholders who kept their balance low and never missed a payment saw the largest average score gain over 12 months (+165 points), while those with high balances who also missed payments saw an average fall (−70 points).

Source: internal ClearScore data, ~240,000 first-time credit card holders tracked over 12 months. Groups had different average starting scores - worth noting this is associational, not a controlled comparison, and individual results will vary.

The two groups in the middle of the chart are the most telling. First-time cardholders who used a high share of their limit but never missed a payment still saw an average gain of 98 points. Those who kept their balance low but missed payments saw no average change. That suggests on-time payment matters more than utilisation alone, although keeping your balance low may partly offset the impact of missed payments.

These groups started from different average scores, so the figures show a pattern rather than proof that one habit caused a particular change. Many factors affect your score, and individual results will vary. Payment history and utilisation are two of the main factors that affect your credit score.

How much of your credit limit should you use?

Generally, the less the better. Credit utilisation is one of the things the CRAs look at, and your score can go up or down as it changes. Equifax says that keeping utilisation below 25% is considered good practice in the industry. A high balance compared with your limit can suggest you're relying heavily on borrowing, even if you pay on time.

To work it out, divide your balance by your credit limit and multiply by 100. For example, a £125 balance on a £500 limit is 25% utilisation, so keeping your balance under £125 keeps you below that level.

First cards often come with modest limits, so one larger purchase can push your utilisation up quickly. Most lenders send updates in line with your statement date, so paying off some of a bigger purchase before your statement date can help keep the balance that appears on your credit report lower. However, a provider may report the balance around the statement date and therefore subsequent payments may not be reflected until a later update

For a deeper look, read our guide to the ideal level of credit utilisation.

Should you pay the full balance or just the minimum?

Paying at least the minimum by the due date keeps your payment record clean, but paying the full statement balance by the due date can avoid purchase interest under the card's terms; the balance reported to a CRA depends on the provider's reporting date and the balance then outstanding. If you pay less, interest is charged on everything you owe, and MoneyHelper says rates are typically between 25% and 60%. You can see how the average credit card APR compares in our guide.

Only ever paying the minimum can also lead to what the FCA, the UK's financial regulator, calls persistent debt. This is when, over 18 months, more of your payments have gone on interest, fees and charges than on paying back what you actually borrowed. Under the FCA's persistent debt rules, your provider must then contact you and prompt you to repay more quickly, and your card may eventually be suspended if nothing changes.

A direct debit for at least the minimum repayment is a useful safety net, so a busy month never turns into a missed payment. If you can afford to, set it to pay the full balance instead. However, always ensure you check that the payment has gone through.

What happens if you miss a payment on your first card?

A missed payment is usually recorded on your credit report and can lower your score. Citizens Advice explains that information like this is usually held on your credit file for six years. The good news is that its effect on your score tends to fade as it gets older and you get back to paying on time.

If it happens, pay as soon as you can and contact your card provider if you're finding it hard to keep up, as they may be able to help. You can read more about what happens after a missed payment in our full guide.

If money is tight, read our guide for when you're struggling to pay your credit card. Free and impartial help is also available from MoneyHelper, StepChange and National Debtline.

A lower score doesn't define you. Your credit score is a snapshot of your history at one point in time, and when you're new to credit, a short history is simply part of how scoring works. Every month of on-time payments adds to that history, and where you start isn't where you'll stay.

How long does it take to build your credit score with a credit card?

There's no set timeline. Because most lenders report monthly, it can take a few weeks for a new card and your first payments to show on your report. From there, progress tends to build with each month of on-time payments.

The ClearScore data above follows first-time cardholders over 12 months, which is a useful window for judging your progress. Everyone's starting point and credit file are different, though, so no particular score or timescale is guaranteed. For more ways to strengthen your credit file alongside your card, read our guide to building your score from scratch.

What to do in your first year with a credit card

• Set up a direct debit. Cover at least the minimum repayment, and ideally the full balance, so you never miss a due date.

• Keep spending small and planned. Use the card for things you'd buy anyway and can clear in full each month.

• Keep your balance low. The less of your limit you use, the better it generally looks on your report.

• Avoid cash withdrawals. They usually come with a fee and interest, even if you repay in full.

• Space out new applications. Each application usually leaves a hard search on your file, and several close together can concern lenders.

• Keep the card open. An older account can help show a longer credit history. If your card has an annual fee, weigh that up. Its important to note that closing a card can affect account age or utilisation, while keeping it open may involve fees or continued access to borrowing; you should always consider your personal circumstances with things like this.

• Check your report regularly. Checking your own score doesn't affect it, and it helps you see your progress and spot errors early.

Track your progress for free with ClearScore

It helps to see your progress as you go. ClearScore gives you free, forever access to your Equifax credit score and report, updated every week. You can check when your new card first appears on your report, see the balance and limit your provider has reported, watch your record of on-time payments build month by month, and spot anything that doesn't look right early. Check your score for free.

18+, registration required, T&Cs apply. ClearScore is a credit broker, not a lender.

Frequently asked questions

Can you build credit with just one credit card?

Yes. One card managed well can build your credit history, because each month of on-time payments is added to your report. You don't need several cards to get started, and applying for a few in a short space of time can concern lenders. Our guide to the ideal number of credit cards covers this in more detail.

Is it bad not to use my credit card?

An unused card isn't usually a problem for your score in itself, but it adds little to your history. Using it for small, regular purchases that you pay off in full shows lenders how you manage credit over time.

Does paying off my credit card in full help my credit score?

Paying in full and paying the minimum both count as paying on time. Paying in full also means you won't pay interest on purchases, and it keeps your utilisation low, which generally supports your score.

Should I ask for a credit limit increase on my first card?

A higher limit can lower your utilisation if your spending stays the same, but it only helps if you won't spend more. Some providers review your account and may offer an increase after a period of on-time payments. Check with your provider whether asking for one involves a credit check.

Does closing my first credit card hurt my credit score?

It can, at least in the short term. Equifax notes that closing an account you've had for a long time reduces the average age of your accounts and can change your utilisation, and your first card is likely to be your oldest account. If there's no annual fee, keeping it open with occasional use is often the simpler option.

How often does my credit card provider update my credit report?

Most lenders send updates to the CRAs once a month, often in line with your statement date. ClearScore refreshes your Equifax report every week, so you'll see changes soon after Equifax receives them.

Important information

This article provides general information only and does not constitute financial advice. Individual circumstances vary, and you may wish to seek independent advice before making financial decisions. Information is accurate at the time of writing and may change.