First Credit Card Applications
If you're applying for your first credit card, you might wonder why a lender wants to know about your credit file.
Essentially, the lenders need to make a decision on how likely it is that you will repay the money you spend on the card, whether you can afford to take out credit plus any interest – and the common way of doing this in the financial industry in the UK, is to check your whole credit history, which is held by credit reference agencies such as Experian, Equifax and TransUnion (formerly Callcredit.)
How does my credit history affect me?
Whenever you take out a loan, get a credit card or borrow money in any other way from financial institutions, the information usually gets recorded on your credit file.
Your student loan, rent payments and even your mobile phone contract may all count as forms of credit, and the more often you repay what you owe on time, including any recommended monthly payments, the better your credit file looks over time, creating your "credit history".
However, any missing or late payments may also show up on your credit file, which can lead to lenders giving you a low or poor credit score over time. This in turn will make it difficult to access further credit.
Credit history vs. credit scores
Your credit history isn't quite the same as your credit score.
It's a common mistake to think everyone has a single credit score – in fact, each lender assigns its own credit scores individually, by checking your credit file and scoring you based on what they think you can afford to repay, and how well they think you will manage your credit.
A lender will either offer you credit or reject your application for credit, based on the credit score they have given you looking at your overall profile.
This will also help decide what product the lender may decide to offer you if accepted: for instance, you might be able to get a high interest loan or a high interest credit card if they’ve given you a poor credit score, to account for the extra risk they’re taking by lending to you.
Different lenders have different ways of scoring, so just because you’ve been rejected by one lender it doesn’t mean that you won’t be accepted by someone else. With a Vanquis credit card for poor credit, you’ll be able to rebuild your credit when this might not be possible with other lenders.
However, if you're being rejected by a lot of lenders, it's likely that one of two things are happening: either your credit file is showing a bad credit history (or other problems, such as bankruptcy or court fines), or you don't have a credit history in the UK at all. If you don't have a credit history, that could mean you don’t have a ‘known existence’ to lenders – for some, that's an even bigger risk than someone with a bad credit history.
How to check your credit history
You can check your credit report by using online services, such as Experian's CreditExpert. This will give you access to the same information lenders see before they decide whether to offer you credit or not. You can check that the information on your credit file is correct and ask the credit reference agency to update it if necessary – if there's anything incorrect on there, they are required by law to correct it.
It's also a useful way to catch identity fraud – if there are any credit cards or loans on your history that you don't remember taking out, somebody else could be using your personal details to get credit in your name.
What to do if you have a poor credit history
If your credit history is poor (or non-existent), it might make it difficult to get conventional forms of credit. It's sensible not to just keep applying if you've been refused several times in a short period – because applications for credit are recorded on your credit history and are visible to lenders, and lots of unsuccessful applications in a short space of time will make things look worse.
Instead, there are ways of checking your eligibility for credit before submitting a full application. Vanquis’ new Express Check tool will help you find out if you have a chance of being accepted with no risk to your credit file.
We offer credit cards with low credit limits that are specially designed for people who are struggling to access credit elsewhere. By making regular repayments to your first credit card and managing all your other financial commitments, you can build or repair your credit history and eventually gain access to the full range of credit products.