If you don’t have any history of managing credit, you might find it difficult to get credit.
This is because lenders want proof that you’ll be able to repay what you borrow, and it’s hard for them to tell whether you’ll be a responsible borrower if you’re lacking a credit history. Although this means there’s no history of you managing credit badly, there’s also no history of you managing credit well either, so you might find you get refused at the first hurdle by many lenders.
Some of the best credit card deals are reserved exclusively for those with excellent credit scores, so you might want to hold back applying if you’ve never handled credit in the past as you may struggle to be accepted. It’s a good idea to build up your credit rating before going straight in at the top - you may have to choose a credit card with a higher interest rate to begin with, just so you can build a positive credit history.
If you do decide to take any form of credit you must be confident that you can make your payments every month or you could risk damaging your credit history.
Credit building credit cards
Some credit cards, such as Ocean’s, are designed specifically for those with poor or non-existent credit histories. Typically they give you a small credit limit to start with, but providing you make at least the minimum repayment on time each month, you may be offered a higher limit over time and your credit rating will start to build. This means, if and when you do apply for further credit, other lenders will be re-assured to see that you are capable of managing credit responsibly.
Try to clear your balance in full each month, as this will mean that you don’t have to pay interest on purchases. If you can’t pay off the balance in full it is important to try and repay more than the minimum payment each month – otherwise you could find that your balance could take many months, or even years, to clear.
You could potentially improve your chances of being accepted by:
Signing up to the electoral roll
This is really important - being signed up is a signal to lenders that you are who you say you are, and that you really do live at that address.
If you’re already signed up to the electoral register but you’ve moved house and haven’t updated your address, this could cause problems too. You must remember to re-register via the gov.uk website.
Make sure you make any payments on time
You could prove to your potential lender that you are a reliable payer by making sure your current bills get paid on time. If you’re late paying your mobile phone bill or rent for instance, a mark will be left on your credit file so this might reduce your chances of being accepted for a credit card.
Keep within your overdraft limit
If a creditor has limited credit history to base their decision on, they may well look at how you’ve handled your overdraft – if you have one. Frequently spending over your limit and being hit with charges could negatively affect your chances of getting credit, so you should make sure you keep within your limit at all times.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.