New to Credit?
Even if you've never had problems with debt, you might still find you get refused for credit – not because you have a bad credit history, but because you don't have one at all. If you've never had any kind of credit arrangement, you're essentially "invisible" to lenders, and a blank credit history can be just as unattractive as one filled with missed payments.
This is because lenders use your credit history to get an idea of how well you manage money and repay what you owe. If you don't have one, they don't have any idea what you're like – you could be bad with money, or even a fraudster. Without any point of reference, the majority of lenders will refuse to take a risk on someone they can't assess.
Build up a credit history
You might find that you're being refused for credit, even though you've never borrowed money before - this might be due to the lack of sufficient credit history that would allow lenders to asses your financial habits.
Despite what you may have read, there's no quick fix to establishing a good credit history. It will take at least a few months, and in some cases even years, of doing the right things.
First of all, make sure you can meet all your financial commitments, including your bills, rent, student loan, mobile phone contract and so on. Paying these promptly and never missing a payment will go a long way to showing that you can manage money without any problems.
As well as establishing a good credit history, there are a number of other things you can do to make yourself more attractive to lenders. For example, make sure you're registered on the electoral roll – this provides proof of identity, which helps allay any fears of fraud.
Also, changing jobs or addresses too often, might not affect your credit score per se, but lenders do tend to ask questions about your employment and living situation, and someone who moves around a lot and doesn't maintain a long-term job can seem like a more risky proposition.
Getting your first credit card
While all the methods above should help you establish a credit history over time, you can also apply for a credit card that's tailored for people in your situation – people with no credit or bad credit. These cards tend to have higher interest rates and lower credit limits than mainstream ones, they offer a good way to borrow and repay regularly, thus showing lenders that you can manage a line of credit.
Although there's no guaranteed acceptance with any credit card, you may have a much better chance of being approved for one of these specialist products than one from a mainstream lender. Once you have established a good credit rating, you can move on to more competitive forms of credit.