Credit applications have tightened up over recent years and ‘credit history’ is one of the biggest factors affecting your ability to get credit. Without doubt it is also one of the personal finance issues I get asked most frequently. It’s especially important for students and young people starting out managing their own money
So how can you build up a clean credit history if you have never had any credit?
Your own bank is quite often the best place to start. If you have had an account with them, and perhaps used a debit card when you were younger then you will have some sort of history that the bank can look at. If you have used that account correctly and not gone into overdraft without asking, for example, it will stand you in good stead.
I spoke to a few banks about this question and the following response is indicative of the way they operate. “We consider a range of factors before approving a credit card application, including income and credit history. Whilst we do not have a specific application process for those with either a poor or no credit history, we always look at each application on its own merits.”
If your own bank is not willing to help you for whatever reason, and the unfortunate thing about this process is that they won’t always give you a reason for rejection, there are a number of other lenders who specifically allow applications from people with no, or a poor, credit history. Their cards tend to have lower credit limits and higher interest rates but it might be a place to start especially if your plan is to only use the card occasionally and in an emergency.
In fact if you buy something every so often using your card and remember to have the balance paid off before interest would become payable, then you will start to build up a useful credit history that is positive. You do have to take care to make payments before the due date to avoid interest charges, perhaps setting up a direct debit for regular payments is a good idea.