Figures have shown that people with little or no history of borrowing money are struggling to get accepted for a mortgage deal.
It’s been revealed that people with thin credit histories are struggling to climb onto the property ladder. We explain how this could affect you.
What’s this story about?
Recent figures have shown that over 1 in 10 adults in the UK could be rejected for a mortgage deal if they applied. This is because they have a thin credit history, which means mortgage lenders are unable to see how they handle their finances.
A thin credit history simply means that there’s little evidence that a person has borrowed credit. All borrowing information will appear on your credit report, which tracks any credit accounts and payment history.
Without a clear track record of making credit payments on time, mortgage lenders are reluctant to lend people money.
James Jones, from the credit report agency Experian, says:
'If you have little or no track record of managing credit you can easily find yourself in a similar position to people with payment arrears or even those who have defaulted on borrowing altogether.'
How does this affect you?
If you’re a saver and have never needed to borrow any money, you might think you’re financially better off than those who regularly use credit. While this can be true, it can make it trickier to get accepted for a mortgage deal.
This can also be the case if you’ve retired or recently divorced. If your ex-spouse handled all of the bills, you may be left with a thin credit history.
If you've been rejected, you could start to hurt your credit history if you apply for another mortgage soon afterwards. Multiple applications can appear on your credit report and could make you seem a little credit-hungry - which can scare lenders away.
Our key tips
The good news is that bulking up a thin credit file isn’t impossible. In fact, it can be really quite simple:
Make your rent payments count – if you make your rent payments on time, you can use this to build your credit history by signing up to Credit Ladder
Use a credit builder card to pay for small purchases. When you’ve shown that you can repeatedly make the repayments on time, you’ll soon start to build and improve your credit history
Sign up to vote - registering to vote will also help you build your credit history, as it proves that you are who you say you are when you make an application
See if you're eligible before you apply - look out for eligibility checkers which let you know if you're likely to be approved without leaving a mark on your credit report
Disclaimer: All information and links are correct at the time of publishing.