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Building your credit history from the foundations up
Published 18 November 2016 by Linzi Nuttall
No credit history? You can still get a credit card.
It’s the old conundrum – how can you get any form of credit card if you need to have a credit history to do this? It’s a little bit like trying to get on the career ladder and you get turned away because you don’t have any relevant experience for the job you want. After a while, you can feel like you’re not getting anywhere.
If you are thinking about taking out a credit card, this might be for small emergencies or to build up your credit history so you’ve got the option to apply for other types of credit in the future. But if you’ve never had any history of managing credit, you may find you struggle to get accepted.
Lenders want to see that you are able to pay back what you borrow and they can only judge this based on you being a responsible borrower. Though you have no history of managing credit badly, there’s no measure to see whether you manage your credit well either, which could mean you’re refused at first by many lenders.
Because some credit card deals are available to those with excellent credit histories, your best way to qualify for the most competitive interest rates is by starting small. You won’t want to apply for a card and be refused time and again as most lenders will see this as a negative sign and that you’re desperate to borrow. Choosing a credit card aimed at first time borrowers will enable you to slowly build up your foundations and establish a positive credit history.
Credit building cards
There are lenders that understand and cater for those with a poor credit history or who have never borrowed before. You’ll usually start off with a relatively low credit limit, but providing you can repay at least the minimum repayment on time every month, it will help to build up your credit history. This will show the lender you are increasingly responsible with handling credit and may be offered a higher limit in time, as your credit history improves.
If you clear your balance in full every month, you won’t pay the interest on purchases. Don’t worry if there are times when you can’t pay off the full balance. In this case, try to repay more than just the minimum if possible. If you don’t, you could end taking months or years to clear the full balance.
Other ways to keep your credit history healthy
Signing up to the electoral roll is surprisingly a great help for your credit history. Don’t worry, you don’t have to vote – it just proves you are who you say you are and your address is correct. If you’ve moved house and haven’t updated your address to coincide with the electoral roll, this may cause problems. Update all your details to give a clear picture at the Gov.uk website.
Pay everything on time
Paying your utilities and your mobile phone contract on time every month will show the lender that you’re a reliable payer. You can even improve your credit history by paying your rent on time. Set up standing orders to ensure your payments go out on time and make sure there will be enough money in your bank account to cover them.
You can see if you’re likely to be accepted for thinkmoney’s credit card without the application showing on your credit history by using the QuickCheck tool.