Why is credit important?
Even if you've never had problems with debt, you might still get refused for credit. That’s because if you haven’t had credit before - like a loan, credit card - lenders can’t see how well you can manage it. A blank credit history can be as off-putting to lenders as a history filled with missed payments.
Credit reference agencies use your credit history and other factors to give you a credit score. Lenders then use this score to understand how well you manage money and repay what you owe. A limited credit history means that lenders can’t work out if you’re a high-risk borrower, a low-risk borrower or even involved in fraud. In this situation, most lenders won’t be prepared to take a risk, so they will turn down your application for credit.
Is it better to have bad credit than no credit?
Bad credit or no credit can both make it less likely that a lender will let you borrow from them. In either case, you might need to look for other solutions to build your credit. Here at Vanquis Bank, we offer ‘credit builder’ credit cards that you can use to build and improve your credit rating.
Once you have bad credit, it could take some time to repair it. If you’re looking for help with managing your financial problems, it’s a good idea to speak to a professional financial advisor.
You can seek advice from free money advice services such as:
- StepChange Debt Charity - For debt advice throughout the UK phone 0800 138 1111 or visit www.stepchange.org
- MoneyHelper - For free, unbiased and easy-to-access money tools, information and advice, visit www.moneyhelper.org.uk/ or phone 0800 138 7777 to speak to a Money Adviser
- National Debtline - If you live in England, Wales or Scotland phone 0808 808 4000 or visit nationaldebtline.org for debt advice and information
How to build up a credit history
It can take several months, or even years, to build a good credit score. To help you do this, it’s a good idea to keep a record of your financial habits. When you’re building your credit profile, it’s good to show that you can meet your financial commitments on time.
Read our full guide on improving your credit score for tips on building up your credit history.
Getting your first credit card with no credit history
Don’t worry, if you’ve got no credit history, you can still start to build up a credit score.
When you apply for your first credit card, it’s worth considering a credit card for bad credit as a way to build your credit score. If you’re a student, it might be worth getting a special credit card for students - this can help you build your credit score before you start a paid job.
If you’ve never had to use credit before and you don’t know which card you might be eligible for, you can use our quick and easy eligibility checker.
Student credit cards
Full-time college and university students can apply for a student credit card. These products are specially designed for students who don’t have the credit score and income to be approved for a standard credit card.
How student credit cards work
To stop debts building up, credit cards for students generally have a lower credit limit than standard credit cards. Their credit limits are typically between £250 and £1,000.
As with standard credit cards, student credit cards have a pre-arranged credit limit. If you pay the balance off in full before your statement is produced, you’ll avoid being charged a monthly rate of interest, . Your balance will take longer to pay off if you just pay the minimum amount. If you miss any monthly payments, this can damage your credit history
How to get a student credit card
We don’t offer a specific student credit card but you can still apply for one of our standard credit cards, using our quick and simple enquiry form to check your eligibility online. Within 60 seconds we can probably tell you whether you’re entitled to a Vanquis Credit Card, so you can start building your credit today. This is a ‘soft check’ too, which means that it won’t go on your credit record, and it can’t spoil your credit rating in the future.
What is adverse credit history?
Adverse credit means a less-than-perfect record of repaying credit commitments: it’s another way of saying bad credit or poor credit. If you have an adverse credit history, this will usually be because you’ve missed repayments on a credit card, loan or mortgage. This will make it harder for you to get approval for credit or finance.
If you default on repayments, the money might have to be recovered by a debt collection agency or a County Court Judgement (CCJ). This information can stay on your credit file for up to six years from the date of account closure, and it can continue damaging your chances of getting credit. Don’t worry; your chances will improve over time, as long as you keep up with your current repayments. Also, the record of your payment default will be removed automatically after six years.
Checking your credit history
There are three main credit referencing agencies in the UK: Experian, Equifax and TransUnion. Each of these agencies collects information about how well you manage credit. For a small fee, you can usually get a copy of your credit report through the credit agency's website..
Try to remember that different lenders use different credit agencies to check your credit history. This means that before you apply for credit, it’s a good idea to find out which agency your chosen lender uses, then get a copy of your credit report to see your credit rating.
Alternatively, you could sign up to a free credit-checking service like Experian or Noddle, or take an eligibility check with your lender before you apply.
Checking your eligibility for a credit card
An eligibility check is a free service offered by lenders to help you find out if one of their credit cards is suitable for you. These checks are usually what we call a ‘soft credit search’, meaning they don’t damage your credit score, unlike the ‘hard searches’ carried out by credit referencing agencies. A ‘soft credit search’ will give you an initial decision without leaving any trace of a search on your credit file.
The Vanquis eligibility checker is a free service that will give you an instant initial decision, without impacting your credit score. Find out more by checking our credit card eligibility tool.