People often talk about how credit history has a major impact on your credit score. That’s great if you’ve one - but if you haven't, how are you supposed to get a credit history and build it up if no one is willing to lend to you - because you’ve no credit history.
This is a common feeling for those that are new to the UK or for those who are only just starting out. Whilst it can feel like you’re going around in circles, fear not, there are some steps you can take.
1. Consider a credit builder card
As the name suggests, this type of credit card is aimed at those that need to build up their credit. They work in the same way as a traditional credit card - but are likely to have stricter terms and conditions. There are a variety of different offers available - so make sure you do your research!
2. Report your rent payments
If you’re a tenant and you can show that you’re paying rent on time, every month, then it’s worth signing up to services which can help make your credit report reflect this. Platforms like Canopy can track and record your rent payments and then report the regular payments to the leading credit referencing agencies. It’s a free service which will undoubtedly build up your credit history, while the paid version of the service will also improve your credit score.
3. Become an authorised user on a credit card
This is basically asking someone to add you to their credit card account as an authorised user. Which means you’ll get a credit card in your name, which is linked to the primary account holder of the card.
As an authorised user you won’t be responsible for making payments, that’s the job of the primary account holder. So it’s important that you know who you are being associated with, and ensure they have responsible payment behaviour. It’s also worth checking with the credit card company to determine if they report information to any or all of the three nationwide credit bureaus.
4. Get a Student Credit Card
If you’re a student and can prove it you could get a student credit card, which is designed to help build up credit. They normally have lower limits. And another thing to bear in mind is The Credit Card Act of 2009 requires credit card lenders to only provide credit cards to consumers who have the ability to pay the monthly minimum.
5. Get a Co-signer
This is when you get someone to be legally responsible for paying a debt off if you do not pay back a loan as agreed. A typical example of this is when parents co-sign on a student loan or car purchase. The advantage of getting a co-signer is you may be able to get better loan terms or you might qualify for a loan you may not otherwise get. This is something no to enter into lightly - as failure to keep up with terms could impact both you and your co-signer.