MoneyMagpie

Jul 04

How to build a credit score fast

If you’ve never borrowed and kept out of debt you might suddenly need to build a credit score fast.

This is because, paradoxically people who are good and sensible and never take out loans or credit can actually be penalised for it!

Not having a ‘credit history’ (i.e. you haven’t taken out loans or credit cards) means you’re a blank piece of paper to lenders (and that includes mobile phone companies who wonder if you’re a good bet for a contract). They don’t know if they can trust you to pay it back.

Crazy, but that’s the way it is.

So, how do you build a credit score fast when you need to?

Well it depends on your definition of fast! Frankly it’s going to take a few months whatever you do, but see how you can do it in reasonable time here.

 

You may not have a credit history because…

Credit Score unavailable on laptop

  • You’re a student and you don’t have a regular income
  • You have just moved to the UK
  • You have just moved back to the UK after living abroad
  • You have never had a credit card or personal loan because you’re sensible and frugal!

None of this is impossible to rectify, it just takes a bit of effort on your part…

Here are the steps to building a good credit score.

 

1. Register on the electoral roll

 

If you aren’t registered to vote you’ll almost certainly be refused credit, so get yourself on the electoral roll now. Head to About My Vote, enter your postcode to find your local council and fill in the registration form online. Then all you need to do is print it off and send it to your council – simple.

 

2. Get your timing right

woman checking time on a wrist watch

If you make multiple applications for credit within a short space of time, it’ll hurt your score. So if you’re applying for credit or even a mobile phone contract – which all require a search of your file – make sure you don’t do it all at once. And if you make an application and get rejected, don’t just keep applying elsewhere because that will damage your rating as you’re making multiple credit applications.

 

3. Get the right credit card

Credit/Debit cards

The best way to build a good credit history is really very simple – borrow small amounts of money regularly with a credit card that will take people with no credit history or a poor credit score and ALWAYS, ALWAYS pay it back in full and on time.

There’s no point in applying for fantastic credit cards which offer 0% interest deals or rewards if you have no credit history – those cards are only for people who have an excellent credit score, and remember a rejection won’t do you any favours.

Instead, if you don’t have a credit record (and, therefore, you won’t be looked at by the usual card providers) go for one of the more lenient cards.

 

Good cards for a poor credit score

There are a few cards on the market now that are specifically for people who have no credit history or a bad credit history.

Remember, only use these if you know you can pay them off.

You think things are bad now? Just see how you feel if you use this, can’t pay it all back and then get the massive interest slapped on every month.

On the whole, the ones with the higher interest rates are the ones that will take people with a worse credit history. Their rates are high to cover themselves if you don’t pay back.

Vanquis

Vanquis Chrome Card

Vanquis (part of Provident Financial which specialises in the ‘sub-prime’ market) does a Vanquis Chrome card with a typical 24.7% interest. It’s specifically aimed at people with a bad credit history (or no credit history) who can’t get other cards.

For people with a worse credit history they do a 29.3% Vanquis Chrome card.

Both of these have a borrowing limit of £4,000.

aqua

Aqua Classic Card

The Aqua Classic card has an APR of 29.7% and no upper limit for borrowing.

Also you can switch your balance to them (not sure why you would at that rate but maybe you have a debt on an even higher card?) and they charge 29.75% on that with a 3% transfer fee.

Aquis card

Aquis Visa Card

The Aquis Visa credit card has an APR of 29.8% and will lend up to £4,000.

CapitalOne

Capital One Platinum Card

CapitalOne has been in the poor credit area for some years. They offer the CapitalOne Classic Platinum credit card at 29.8% with a £1,500 maximum borrowing cap.

They also offer a transfer rate – theirs is 29.84% with a 3% fee.

 

4. Keep an eye on your credit rating

Fair score on credit report

You can see your credit score for free, forever, with Experian. For just £2 you can also get your statutory credit report.

It’s worth looking at your report on a regular basis to check on your progress, particularly when you’re trying to build up a good history.

  • Make sure all the information is correct and up to date.
  • If you notice any old accounts or cards you don’t use, be sure to close them.
  • And if you’re considering applying for a credit card or loan then double check your report just before you do it to make sure everything is as it should be.

 

By the way….

If you just want to have a card to use now for convenience, (maybe for buying things online) you can apply for a prepaid card, although this won’t help you develop a credit history. You can’t be refused on the grounds of your credit rating because prepaid cards don’t allow you to borrow money (and therefore don’t built up a credit history for you), and you only spend what you load onto them. We like the Kalixa Card because it has so few fees. There’s a one-off purchase fee of £6.95, and a small charge for using an ATM but other than that it’s just like using a debit card – except that you don’t need a bank account. Find out more about prepaid credit cards here.

 

What you need to know about your credit file

Why do I need to build a good credit history?

Stressed mum

Because without it you’ll find it almost impossible to borrow money, get contracts ( for a mobile phone for instance) and even rent property.

Who decides what my credit rating is?

Experian credit score banner

There are three credit reference agencies – Experian, Equifax and Callcredit – who collect information about you to send to any lenders. They get this information from various places like the Electoral roll, court records and financial data from banks, building societies and other organisations.

What information do they have about me?

Credit report on phone and laptop

A credit file includes personal information like name, date of birth and current and previous addresses. It also contains all the details of any accounts and contracts opened in your name – both closed and inactive – for six years from the last date of activity.

Public records like County Court Judgments (CCJs) are also likely to appear on the report (again usually for about six years).

How is this information used?

Demystifying the differences between loans and credit cards

When you apply for a mortgage, overdraft, credit card, mobile phone contract, insurance policy and even to rent a property, these companies or individuals will want to see your credit file.

Remember though that your credit file is not the only thing they use to decide whether to lend to you or not – each company has its own set of criteria and all vary slightly from one another.

Why do they want to know this information?

Credit score on phone

Lenders use the information on your credit file (amongst other criteria) to assess how much of a risk you are to them and to see how much money they can make out of you.

So if the information on your credit file leads them to believe that you won’t repay your debt, they’re unlikely to let you borrow money. Equally though, if you’re never in debt and always repay everything back in full and on time you may also face rejection – because a financial institution isn’t going to make money out of you!

 

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