Monday Myth-Buster: I’ve never borrowed so my credit history is perfect

This is one of the most commonly believed myths, and we’re here to bust it!

First things first, if you’re confident your credit history is squeaky clean because you’ve never borrowed, it’s time to change that outlook.

Your credit history may not be bad, but it certainly won’t be good either. To build yourself a good credit history and make yourself more attractive to lenders, the main thing you can do is start using credit – which means borrowing money. 

Everyone has to start somewhere

Despite what you may have thought before, everyone has a clean slate of a credit history in the beginning – once you turn 18. This may stay clean if you’ve never borrowed, but a clean credit history isn’t necessarily the same thing as a good credit history.

When you go to borrow, a lender should check your credit history to see how well you’ve managed payments in the past. They do this to try to lower the chance they’ll lend money to someone who will struggle to pay it back.

But if you haven’t borrowed before, there’s no history for a lender to look at. This is why you probably won’t be accepted for the credit cards, mortgages and loans with the best rates and deals.

Even if you have no plans to borrow right now, it’s sensible to turn your attention to your credit history to put you in good stead for the future. The best place to start is by signing up for ClearScore or Noddle, both of which allow you to check your credit history as often as you like for free. It’s wise to keep checking with these once a month, as this is usually when any updates will be made.

Damage from unexpected places

Although it’s unlikely your credit history will be damaged if you haven’t borrowed before, there are cases where it may have been impacted without you realising.

For example, if you have ever fallen into arrears with your energy provider, you may have marks against you on your credit history. Similarly, missing payments on a mobile phone contract will also impact your credit history.

Pave yourself a good credit history

To get started on building up your credit history, you might want to consider taking out a credit builder credit card or a card for bad credit. These kinds of cards are designed for those who have struggled with credit in the past or who haven’t borrowed before.

All you have to do is spend a little amount each month, maybe just for your weekly shopping or a one-off item. So long as you make at least the minimum repayment each month, you will slowly start to build yourself a good credit history. Of course, it’s a good idea to clear the balance in full every month, as this way you won’t have to pay a penny in interest.

It’s important to remember that not making at least the minimum repayment each month will negatively affect your credit history. We recommend setting up a Direct Debit to clear your balance in full every month so you don’t forget to pay your balance.

The Ocean credit card may be an option for you if you’ve never borrowed before.

You could also improve your credit history just by paying your rent.