Best way to create a good credit rating?

Skeeter said:
My GF recently had a credit card application declined, which we thought was odd as she has never had any debt or been in any financial trouble.

But then we figured that is probably the reason. Shes 25, and other than a Student Loan she's never had any credit on anything. No loans, no credit cards, no store cards. So possibly the lack of a credit rating is why the CC was declined?

What is the best way to build a good credit rating? At some point in the future we will be buying a house so any improvements we can make to her credit rating before then will help. Taking out a credit card and paying it off each month seems out of the window as she can't get a CC in the first place.
Click to expand...

I was saying the same to my GF the other day. She's 20 and has no credit history at all so I recommended getting a CC like Barclaycard Initial which is aimed at people with no/little/bad credit history, yet for these types of cards offer better interest rates than the rest.

However, the whole point of getting one to build some kind of credit history is that you don't really want to be paying any interest and should aim to spend a little on it and pay it off in full each month.

RedvGreen said:
This is a can of worms.

I've got a very good credit score, 975 out of 1000 and I get declined for cards ( "We regret to inform you that on this occasion you do not fit our current customer classification. However, based on your application we have guaranteed you a card with our sister company on a respectable interest rate of 48.5% APR").

There is impetus for card companies to be 'responsible lenders', but they are essentially out to make profit. I believe that most are actually after someone who has a bad history so they can charge them exorbitant fees either on missed payments, or on very high interest rates (profits).
Click to expand...

A credit score is actually just a number. It gives an indication your history with credit and behaviours in repaying, but an exact score is meaningless. Each lender has different criteria so you may well get accepted with one and not the other, not necessarily both because a score says so.

When I was 18, I had a CC with a £1,000 limit and one with a £750 limit with 2 different providers. Someone else mentioned that the limit will probably be low on these cards, but that may be a good thing. Say they give her one with £250 on, with good payment history they may offer to increase it but you can always decline these also. Stops you getting into trouble and needlessly spending.
 
Last edited:
Ok done some poking around in Noodle and it can show you any blots on your history. So I will start there and make sure there isn't a forgotten bill buried in her past or something.

If thats all fine then I might go for a paid report, or go with what RedvGreen was mentioning and assume the CC she applied for didn't want someone who wouldn't incur any iterest, and try a Barclaycard Initial or similar.
 
Skeeter said:
Ok done some poking around in Noodle and it can show you any blots on your history. So I will start there and make sure there isn't a forgotten bill buried in her past or something.

If thats all fine then I might go for a paid report, or go with what RedvGreen was mentioning and assume the CC she applied for didn't want someone who wouldn't incur any iterest, and try a Barclaycard Initial or similar.
Click to expand...

Be warned Noddle can be a bit out of date and aren't as useful as other CRA's. Checkmyfile.com is free for your first month (£7.99 after that but it's easy to cancel) and gives you reports from multiple CRA's and info from Experian. Their data is much more in-depth and easy to understand also :)
 
Is she on the electoral roll? Can be one of the main reasons they decline people without much credit history.
 
Windle said:
Is she on the electoral roll? Can be one of the main reasons they decline people without much credit history.
Click to expand...

Came in to post this, being on the electoral role is instrumental in having a reliable credit file.

As others have said, try for something like Vanquis or Capital One, the interest rate is of no concern as long as you clear the balance month by month.

Capital One is probably the easiest card to get, I was approved for one 7 months after going bankrupt. From there I got a Vanquis card a year later. Both obtained purely to build credit file post-BR.
 
Semple said:
Yes this can also be an issue with having a very good credit rating. Unfortunately lenders need to make money, and if you're a candidate who always pays off credit without issues, then a lender will never make any money out of you, which is bad business for them.
Click to expand...
The lender still benefits from you having a credit card, spending on it, and then paying off immediately. They gain your debt (to them an asset), plus small fees from the transaction, any potential fees/charges in whatever situation, plus a customer - that may use other banking services.

If you have a perfect credit history and meet the customer profile requirements, then they'll accept you. The customer profile may be a maximum amount of debt, certain income level, certain risk profile etc.
RedvGreen said:
This is a can of worms.

I've got a very good credit score, 975 out of 1000 and I get declined for cards ( "We regret to inform you that on this occasion you do not fit our current customer classification. However, based on your application we have guaranteed you a card with our sister company on a respectable interest rate of 48.5% APR").
Click to expand...
I suspect the lender consider that you have outstanding debts that are too high relative to your income, or that the card has perks that are not worth offering for your likely spend based on your income/demographic information.
 
I thought the "credit score" you get from companies like Experian or Equifax is pretty worthless, it's only a very loose indicator - as it's simply Experian/Equifax's interpretation of your information, compared with market data which gives them the number between 0-1000..

My understanding is that when you apply for credit, the creditor has their own proprietary system which does the scoring, based on the raw data held by the credit ref agencies, they're all different and highly secretive..

I could be wrong, but as an example - having payday loans won't do anything to your credit-score because it's just another account (provided it's paid on time) but some creditors have policies where they won't touch any customer with a payday loan on their account at all, others will - it depends on their scoring and acceptance criteria.
 
V-Spec said:
I thought the "credit score" you get from companies like Experian or Equifax is pretty worthless, it's only a very loose indicator - as it's simply Experian/Equifax's interpretation of your information, compared with market data which gives them the number between 0-1000..

My understanding is that when you apply for credit, the creditor has their own proprietary system which does the scoring, based on the raw data held by the credit ref agencies, they're all different and highly secretive..

I could be wrong, but as an example - having payday loans won't do anything to your credit-score because it's just another account (provided it's paid on time) but some creditors have policies where they won't touch any customer with a payday loan on their account at all, others will - it depends on their scoring and acceptance criteria.
Click to expand...

The actual score is just made up by the credit reference agencies and is like you said pretty worthless.

The only thing you need to check on your credit report is that they list your accounts etc properly, that you don't have any errors listed and that you're on the electoral role.

If she's after a starter card, maybe try Tesco? They have a credit builder card that also gets you club card points.

http://www.tescobank.com/creditcards/
 
V-Spec said:
I could be wrong, but as an example - having payday loans won't do anything to your credit-score because it's just another account (provided it's paid on time) but some creditors have policies where they won't touch any customer with a payday loan on their account at all, others will - it depends on their scoring and acceptance criteria.
Click to expand...

Actually it's quite a handy way to build up a positive credit file. I've had 6 payday loans through Wonga over the last 2 years, they all show on my file as successfully settled credit as 6 seperate entries on my file. Again, as mentioned earlier in the thread with my CC applications, these were taken out purely to add positive information to my credit file. All were in the region of about £100 and paid off in about 3 days as the interest is horrendous.

Also upon the completion of the final pay day loan, about a month later I was accepted for a Barclaycard Platinum card while my bankruptcy was still on my credit file.

I have no doubt these loans had "some" bearing on reflecting positive credit usage but I would imagine if you were to use them every month, it wouldn't look good.
 
Last edited:
It was a Tesco card that was declined.

I'm more interested in checking there aren't any massive red marks or mistakes in her credit profile, than checking the fine details. Hopefully Noodle will highlight if there's anything massively wrong.
 
SixTwoSix said:
Actually it's quite a handy way to build up a positive credit file. I've had 6 payday loans through Wonga over the last 2 years, they all show on my file as successfully settled credit as 6 seperate entries on my file. Again, as mentioned earlier in the thread with my CC applications, these were taken out purely to add positive information to my credit file. All were in the region of about £100 and paid off in about 3 days as the interest is horrendous.

Also upon the completion of the final pay day loan, about a month later I was accepted for a Barclaycard Platinum card while my bankruptcy was still on my credit file.

I have no doubt these loans had "some" bearing on reflecting positive credit usage but I would imagine if you were to use them every month, it wouldn't look good.
Click to expand...

My understanding is that if you take out payday loans and pay them back - then yes, that is has a positive bearing because it's a paid debt.. However, there are a number of lenders out there (especially mortgage lenders) who auto-decline if you have any sort of payday loan on your file, some don't care - but there are those that do.

http://www.thisismoney.co.uk/money/...oan-really-ruin-chances-getting-mortgage.html

Some lenders even have a question "Have you ever taken out a payday loan" when you apply for credit - ticking "yes" auto-declines you on the spot,
 
Noddle is generally a good few months out of date with regards to your credit file (hence it being free).

I would sign up for the free Experian trial and get yourself a proper look at her file.

(I am a senior analyst in the credit industry and would recommend Experian over all the other possibilities.)
 
V-Spec said:
My understanding is that if you take out payday loans and pay them back - then yes, that is has a positive bearing because it's a paid debt.. However, there are a number of lenders out there (especially mortgage lenders) who auto-decline if you have any sort of payday loan on your file, some don't care - but there are those that do.

http://www.thisismoney.co.uk/money/...oan-really-ruin-chances-getting-mortgage.html

Some lenders even have a question "Have you ever taken out a payday loan" when you apply for credit - ticking "yes" auto-declines you on the spot,
Click to expand...

That's really frustrating as i've had perfect credit since my bankruptcy with the long term goal of getting a mortgage 10 years after the initial bankruptcy.

I originally went bankrupt in August 2007, goal for mortgage is August 2017, currently on target with the credit side of things, no negative strikes, just have to save deposit.

It was actually a MSE article which recommended the use of payday loans to improve credit file.
 
fergie128 said:
Noddle is generally a good few months out of date with regards to your credit file (hence it being free).

I would sign up for the free Experian trial and get yourself a proper look at her file.

(I am a senior analyst in the credit industry and would recommend Experian over all the other possibilities.)
Click to expand...

Also if doing the 30 day free trial, you can get cashback using Top Caashback. So you get the free trial and money for doing so...£10'ish I believe.
 
SixTwoSix said:
That's really frustrating as i've had perfect credit since my bankruptcy with the long term goal of getting a mortgage 10 years after the initial bankruptcy.

I originally went bankrupt in August 2007, goal for mortgage is August 2017, currently on target with the credit side of things, no negative strikes, just have to save deposit.

It was actually a MSE article which recommended the use of payday loans to improve credit file.
Click to expand...

The way I see it (and having read many articles) if you take out a payday loan - you're putting up a flag that says "I'm in financial trouble" because 99% of people wouldn't take out such a thing unless they were in trouble, and statistically people in financial trouble often struggle to pay back debts, and once you've applied for a payday loan - it's on your file for 7 years.

I think the problem is that the use of payday loans has exploded since the appearance of legal loan-sharks (Wonga, Quickquid) who have exploited the fact they can charge any interest they like (5000% APR etc), in doing so makes them able to afford any losses from non-payers.

Whilst it's harsh that there are people auto-declining in the presence of a payday loan - you can't ignore the statistical risk of lending to someone who's willing to accept a 5000%+ APR loan,

Best way to build a credit rating is to get a few *intro* credit cards, (Capital one/Aqua/etc) use them regularly and pay them off every month, or keep the balance at less than 30% of the limit, balance to limit ratio is one of the biggest credit-score killers there is. (aside from defaults and stuff)
 
Last edited:
V-Spec said:
Whilst it's harsh that there are people auto-declining in the presence of a payday loan - you can't ignore the statistical risk of lending to someone who's willing to accept a 5000%+ APR loan
Click to expand...

Fully understand the position of the lender, it makes perfect sense.

However having read your quoted article more in depth, it appears as though it's the more specialist lenders auto-declining in the presence of a payday loan history. Other lenders will simply raise a flag for more in-depth analysis of finances.

I'll no doubt be getting a fairly generic mortgage with a main high street bank and from the little digging i've done over the last hour or two, as long as the payday loans aren't recent, they're pretty much a non-issue.

Just checked my CreditExpert report and my last payday loan completed in 20/05/2012, further back than I thought. With the 6 year limit on credit file information, all but 1 of them will be off my report by 2017. :D
 
Skeeter said:
My GF recently had a credit card application declined, which we thought was odd as she has never had any debt or been in any financial trouble.

But then we figured that is probably the reason. Shes 25, and other than a Student Loan she's never had any credit on anything. No loans, no credit cards, no store cards. So possibly the lack of a credit rating is why the CC was declined?

What is the best way to build a good credit rating? At some point in the future we will be buying a house so any improvements we can make to her credit rating before then will help. Taking out a credit card and paying it off each month seems out of the window as she can't get a CC in the first place.
Click to expand...

Is she on the electoral register for the address at which you made the application?
Try applying through her own bank, they likely will day yes. Spend on the card, then pay it off in full each month.
 
You must log in or register to reply here.
Back
Top Bottom