Lenders like to see some evidence that you’ve been a reliable manager of credit in the past – that you’ve got a record of taking credit and paying it back under the terms agreed.
But what if you don’t have a much of a credit history? You would need to build up a credit profile to support future credit applications.
There could be a number of reasons why there might not be enough information to help lenders come to a decision, for example you’re young and have yet to take out much credit, or you’re still living at home, or a new UK resident. Having no or little credit history could result in you missing out on that mobile phone contract, a mortgage for your first home or the loan you want to buy a car.
Get yourself on the electoral roll – This is easy to do if you are a British or EU citizen. Lenders will check your name and address to prove that you live where you say you do. You can do this even if you are still living at home with mum and dad, or sharing student digs. If you’re not a UK or EU citizen then you can add a short note to your credit report explaining why you are not registered to vote here, or also offer other proof of your name & address.
Show you’re responsible- Smaller forms of credit, like a mobile phone contract or store card, can be easier to be accepted for and also show that you can pay bills responsibly and on time each month. Be careful though – they can sometimes come with higher interest rates and you shouldn’t take out something that you can’t repay.
Open a bank account – Managing it well can help your score and build your history. Just don’t go on a shopping spree and go over your overdraft limit, if you have one, and try to keep an eye on what you are spending!
Manage a credit card – If you’ve got a bank account or a financial relationship with a bank already, they may be happy to give you a credit card as you’ve proved to them that you can manage credit. Once a credit card shows on your credit report, as long as you make payments on time, your credit score should steadily increase.
Show what you already have – If you have a credit history from a previous country, some lenders may be willing to take this into account when deciding whether to do business with you. You’ll need to get it from the credit reference agency in that country, and share it with the lender, but it could be a big help.
Finally, remember to keep a close eye on your credit report to make sure it is in a healthy condition, accurate and up to date. Watch out too for unfamiliar or suspicious entries in your credit report that could indicate identity fraud.