Ways to Build your Credit History
One of the biggest reasons people get turned down when applying for an unsecured personal loan is due to a poor credit history. This also includes having little or no credit history at all in many cases. At George Banco we regularly hear of situations where an individual has never before been in debt, has a stable job and yet, still gets refused when applying for a credit card or loan. For this reason we felt it would be worth covering some of the reasons you may not be helping your credit history and what you can do to improve it.
For any financial lender to feel confident enough with an applicant to agree them a loan or credit card, they firstly want to know their financial history. This of course means that they need to have a credit history in order for any lending facility to be considered. So what do you do to get a credit history?
You could apply for a low limit credit card. These allow people with a bad, little or no credit histories to get small amounts of credit, provided you haven’t been declared bankrupt within the past 18 months and you haven’t had any CCJs in the past 12 months. These credit cards have credit limits ranging from approximately £150 to £1000 and advertise APRs of around 29% to 40% dependent on how the credit is used. In most cases though, the APR is dependent on personal circumstances. If small purchases are made and regular repayments, either the minimum or preferably the full balance are kept up with and paid on time when your statement is produced, it will leave a positive electronic footprint which starts to form a positive credit history.
Another route to gaining a positive credit history is by applying for a guarantor loan and again making sure that the repayments are made on time. This option works for those who haven’t developed enough of a credit history to apply directly for a personal loan, but can demonstrate they can afford the repayments associated with a personal loan and have a suitable guarantor to support their application.
Something to consider that many people are unaware of is that paying for utility bills also leaves a footprint on their credit histories, and most of the mainstream lenders use this as part of their credit scoring. So it is always worth making sure those electricity or gas payments are made in a timely fashion.
Situations can happen where you become in some way linked to someone else’s bad debt by what is called ‘financial association’ but are completely unaware of it. One of the main ways that this association is made, for example, is by holding a joint bank account with another person. If you have a joint bank account with someone with a bad credit history it can bring your credit score down. To check whether you have a financial association with anybody else you can check with the credit reference agencies such as Equifax or Experian. These reports will show you what the lenders are seeing about you. This gives you the opportunity to contact those companies involved and work toward rectifying any mistakes that may be negatively affecting your credit history.
The last way to build your credit history we will look at in this blog is the Electoral Register. If you make sure you are on the Electoral Register, lenders can use this information to establish that you are who you say you are and can track your addresses. In fact, it is fair to say that some lenders will not even consider an application if you are not on the Electoral Register. It’s easy to do and more information about the process can be found at https://www.gov.uk/register-to-vote. You will need to have your National Insurance Number to hand to complete the application.
Check back in the coming weeks for more ways in which you can understand, improve and build your credit history.
If you would like to speak to someone about a guarantor loan or personal loan then click the ‘Get Started Now’ button and complete the simple online form, or alternatively call and speak to one of our helpful representatives on 01225 941941.