Building creditworthiness takes time and diligence. At the heart of improving your Credit Rating is the simple habit of managing existing credit agreements well, and proving to potential lenders that you are a good credit risk.

It’s simple in theory, but one of the biggest challenges is getting on the Credit Report ‘ladder’ in the first place. It’s something of a chicken and egg scenario – being asked to prove that you can manage a credit facility responsibly before you can be accepted for a credit facility. Young adults, people who have only recently moved to the UK, or anyone without a credit history to speak of are likely to find it harder to be accepted for credit.

Recent initiatives such as rent reporting, where people without a mortgage can use monthly rent payments to help build a credit rating, have been praised, but could something similar be done with monthly payments on a smaller scale?

Step forward Grow Credit, a brand new US-based start-up which aims to make it possible to develop your Credit Score through everyday subscriptions such as Spotify and Netflix. Spoiler - this is not a fancy new algorithm that suggests credit cards for you ‘because you watched Stranger Things…’.

The service works by connecting all your applicable subscriptions to the Grow Credit app and taking care of all your regular payments in one place. Grow Credit then reports monthly balance payments to Credit Bureaus (the US version of our own Credit Reference Agencies), contributing to your positive payment history and ultimately, helping to establish a more detailed record of managing credit.

Great on the face of things

Building a credit history through monthly subscription services is a new concept and one that would likely appeal to a wide audience.

This sort of facility could be particularly useful for millennials, who often don’t have much of a credit history, but are very likely to hold multiple monthly subscriptions. Grow Credit doesn’t involve a credit check itself and is designed to be used solely for subscription payments, with up to $50 of transactions permitted each month.

Over time, and assuming that any lender carrying out a credit check is happy for these repayments to carry weight when it comes to assessing an individual’s Credit Rating, it may open up access to more traditional forms of borrowing such as credit cards and loans.

The benefits of subscriptions building credit

Though the concept of reporting subscription payments to Credit Reference Agencies is a new one, Credit Reports have long contained records from organisations other than lenders.

In the UK, it’s quite common to see utility accounts (gas and electricity) reported, as well as mobile phone and home telephone contracts.

As already mentioned, some rental agreements are now shared with Credit Reference Agencies, and there are a number of other products aimed at helping an individual to build their Credit Rating in an alternative way.

For example, some companies will offer you a small ‘loan’ (that you never actually get access to) that you then make repayments on over the course of 12 months. These repayments are reported to Credit Reference Agencies in the same way that a normal loan would be, and again, could theoretically help you build your Credit Rating over time.

The downside to both these products and the Grow Credit App is that should you miss any payment, this too will be reported. That means that you could actually hurt your Credit Rating, rather than improve it.

Moving to match consumer habits

The attempt by Grow Credit to include subscription services in Credit Reporting is no surprise when you look at the surge in consumer uptake in services that charge a monthly fee. In the UK, more of us than ever are signing up to recurring subscription services. 90% of the British population are now subscription customers in one form or another. That’s an estimated 58 million of us. This has dubbed us ‘Generation subscriber’.

We’re subscribing in our masses, not just to video and music streaming services - we’re now signing-up for regular shoes, flowers, coffee, beer, shaving products, t-shirts, fresh produce and more, delivered to our door.

If this is now becoming the preferred retail method for the modern consumers, other industries will surely adapt to become part of the subscription revolution. Grow Credit look to be the early adopters of the subscription trend in finance and credit services.

There are still questions to be answered

Many people will reasonably scoff at the idea of including something as trivial as a £6.99 monthly subscription being used to assess creditworthiness. Should products like these really be considered as a reasonable indicator of how likely someone is meet repayment on a credit agreement?

Subscription services generally don’t involve any sort of contract or commitment, and don’t give any indication of managing money well.

Because subscriptions are so easy to come by, could the incentive of building your credit rating encourage people to sign up for more subscriptions than they need or can afford, and potentially effect more serious payments or debts?

The birth of Grow Credit is breaking new ground in the real definition of credit and borrowing. Questions like these, and more, will all be up for discussion.

Building a Credit Rating

At the moment here in the UK, building credit using subscription payments is currently still just a pipe-dream.

In reality, it’s possible to establish (or re-establish) a credit rating through more traditional means.

Credit Cards that are specifically aimed at people with less detailed or chequered histories have been around forever. Although the headline interest rates are expensive, used properly they can help build a more robust Credit Rating over time. Simply by spending a small amount each month – just petrol for example – and then clearing the balance in full, it will demonstrate to lenders that you can manage credit and over time will open up access to a wider selection of potential lenders and products.

At the same time, with both established lenders and new Fintech firms constantly seeking new ways to meet evolving customer needs, it surely won’t be long before more modern ways to build your credit history come to market.

Check your own Credit Rating

As things stand, having paid your Spotify bill last month won’t influence your Credit Score, but the way you’ve managed any accounts that are actually reported definitely will. Only checkmyfile lets you check your Credit Report based on data from the three main UK Credit Reference Agencies together in one place. It’s free for 30 days, then £14.99 a month and you can cancel any time online, or via phone or email.