Having no credit history can sometimes be just as damaging as having a bad credit history. This is because companies use your credit report to see how financially responsible you are. If they can’t get a picture of whether or not you are reliable in making repayments, they may be less willing to lend to you. This is why it’s a good idea to start building your credit score before you need to borrow money, as with a reliable history you'll find it easier to land a loan in the future or when you really need one.
Building your credit profile from scratch
There are ways you can build up your credit history from nothing to give companies information about you and a reflection of how you handle your finances.
Opening a UK bank account
The first thing you can do is open up a UK bank account if you don't have one already. This allows you to manage your money responsibly and show future lenders you have a relationship with your bank.
Set up direct debits
Setting up your bills as direct debits is a smart idea, as you won’t have to worry about making late payments or forgetting to pay. Managing your utility bills responsibly may reflect on your credit report and show future lenders you can be trusted to pay money you owe on time. Prioritise bills and set them up to leave your account as soon as you get paid. This way, you’ll know they have been paid in full every month, then you can budget for the rest of the month.
Put your name on the electoral roll
Having your name on the electoral roll means companies can confirm who you are and your current address, so it is important to do this to build up your credit history. It only takes a few minutes to register online, and you can do so on the government website.
Take out small credit
Credit cards are a good way to build up a credit history. However, if you don’t have any credit history, it may be difficult to get accepted for a credit card in the first place. A way around this is to start small and build up a good reputation by taking out a small form of credit, such as a mobile phone contract.
Building up from bad credit
If you have requested your credit report and found you have a bad credit history, there are a few ways you can work on steadily improving this too. Some companies may refuse to lend to somebody with a poor credit profile, or they may increase interest rates and fees due to the higher risk of missed or late repayments. Therefore, it’s a good idea to improve your credit rating before applying for any loans. A few of the ways you can do this include:
- Start paying off any credit card debt
- Correct any wrong information such as previous addresses
- Cancel any accounts that are no longer in use
- Check for any debts you may have forgotten about
- Don't apply for new credit in the meantime
Whether you are building your credit score from scratch or trying to improve negative history, the trick is to be consistent and patient. Within three to six months, you should hopefully begin to build up a good credit report.
At Morses Club, we want to help you feel a little more in control of your finances, but we understand that unexpected costs can sometimes throw you off course. We provide cash loans, sometimes referred to as doorstep loans, to help take care of those surprise costs. Doorstep loans aren’t right for everyone, so if you are considering it as an option, it is important you understand how it works before you apply.
