A lot of households in the UK pay for things like Netflix, Spotify, and gym memberships on a monthly basis. Even though making these regular payments can show that you are responsible with money, subscriptions don’t directly improve your credit score. But if you use subscriptions in the right way, they can help you build your credit history and score over time.
How Credit Scores Work in the UK
Lenders check your creditworthiness with three main credit reference agencies (CRAs): Experian, Equifax, and TransUnion. The credit bureaus use the information in your credit report to make your credit score, which shows how likely you are to pay back your debts. Lenders are less likely to give you money if your score is high.
The most common scoring models used in the UK are:
- Experian Score – Ranges from 0 to 999
- Equifax Score – Ranges from 0 to 700
- TransUnion Score – Ranges from 0 to 710
Your payment history (whether you pay bills on time), credit utilization (how much of your available credit you use) credit history length and credit mix are key factors that determine your score.
Why Subscriptions Don’t Directly Affect Your Credit Score
Subscriptions to streaming services, gyms, and other things are not lines of credit; you pay for them up front and don’t borrow money. Your subscription payments won’t show up on your credit report because these aren’t credit agreements that are reported to CRAs. In this way, having subscriptions alone does not improve your creditworthiness.
Certain service providers like utility companies do report your payment activity. However, most subscription services currently do not. So even if you diligently pay your Netflix bill on time each month, those on-time payments are not reflected in your credit report.
How to Use Subscriptions to Build Credit
Even though subscriptions might not have a direct effect on your score, you can use them in a smart way to build your credit history and raise your score:
Pay with a Credit Card
Link your subscriptions to a credit card instead of paying directly via debit card or bank transfer. As long as you pay your credit card bill on time and in full each month, this payment history can positively impact your score.
Use Experian Boost
Experian Boost is a free service that allows you to add recurring bills like subscriptions to your Experian credit report. After linking your bank account, Boost scans your payment history over the last 12 months to identify positive financial behaviors that could boost your score.
Sign Up For Credit Building Services
Some newer credit building services like Grow Credit provide an interest-free line of credit to pay your subscriptions. They report your on-time monthly payments to all three CRAs so you can build credit history even if you have limited existing credit.
Best Practices for Credit Building with Subscriptions
If you plan to use your existing subscriptions to improve your credit rating, here are some tips:
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Only use a credit card if you can pay the balance in full each month. Carrying a revolving balance leads to interest charges that can snowball into serious debt.
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Set up automatic payments on the card to avoid ever missing payments that could damage your score. But be sure you have enough funds in your account every month to avoid failed payments.
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Keep your credit utilization low – your monthly subscription charges should not exceed 30% of the card’s limit.
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An installment loan like a personal loan in addition to a credit card can add credit mix which also helps your rating.
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Avoid opening multiple new credit cards in a short span as this can negatively impact your score.
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Check all three of your credit reports regularly to ensure there are no errors dragging down your score. Dispute any inaccuracies with the CRA.
The Bottom Line
While Netflix and Spotify payments themselves don’t build your credit, you can leverage subscriptions strategically to demonstrate responsible financial habits. This in turn can strengthen your credit profile and potentially lead to a higher credit score over time.
A diverse credit mix of both installment loans and revolving credit along with a consistent history of on-time payments across all your credit accounts is key for creditworthiness. So subscriptions can be one part of your overall credit strategy, but should not be the sole focus.
Everything you need to build credit
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“I am already seeing a huge improvement to my credit score. I even got a credit card which I wasn’t able to do before.”
Nakita, 7 months with Wollit
Can Monthly Subscriptions Help To Build Credit? | Credit One Bank
FAQ
Are monthly subscriptions good for building credit?
That means that your monthly bills for things like rent, utilities, internet and phone service, health insurance, and more probably won’t help you build credit, even if you’ve paid them on time.
Does subscription increase credit score?
If you’re careful with your spending habits and can make payments on time, monthly subscriptions can be a helpful way to build your credit score as they can be another way to show that you are responsible with your money and able to pay off your bills on time.
What is the 2/3/4 rule for credit cards?
The 2/3/4 rule is a credit card application restriction specifically used by Bank of America. It limits the number of new credit cards you can be approved for within certain timeframes.
Can you build credit with monthly payments?
You can show that you are a responsible borrower and start building a good credit history by making small, manageable purchases and paying off the balance in full every month. Remember – if you don’t pay your full balance owed each month, you will have to pay interest on your credit card.