I’m looking for my first credit card
Your One Minute Response...
1Sometimes taking out your first credit card can be difficult, because lenders want to see a person’s credit history as part of the process of deciding whether to accept them.
2Some banks feel more comfortable offering credit cards to established customers - if you have a current account with a bank, you could try them first.
3It might help if you have a utilities account (such as gas or electric) or a mobile phone account (not ‘pay as you go’) or home shopping account in your name.
4If you are eligible to vote, make sure you are registered on the electoral roll so that lenders can confirm your address.
5Consider applying for a credit card that specialises in helping people to build their credit rating.
Applying for a Credit Card for the first time
It can seem that applying for a credit card is easy. There are invitations through the post, via email, in TV advertisements and even at your local supermarket checkout. But if you are applying for a credit card for the very first time, it might not actually be that simple.
When you don’t have a credit history, it can be difficult and frustrating to try and get a credit card or any other type of loan. It’s a Catch-22 if you don’t have a credit history, not many companies will want to give you credit as you won’t have anything on file with the Credit Reference Agencies. And how can you ever hope to establish a credit history if nobody is willing to give you any credit?
It could be because:
- You’ve never needed credit before
- You’ve had credit cards in the past, but in your partner’s name
- You may have never ever bought anything on credit before
- You’re new to the UK
- You’re starting your first job
- You’re a student (although repaying a student loan will give some visibility to the Credit Reference Agencies)
Establishing a good credit history takes time. It takes months or even years to establish a high credit score which is based on a number of factors such as your repayment history, how well you’ve managed your credit accounts, the length of time you’ve had credit and lenders assessment of your ability to afford the repayments. It is important to establish a good credit history and even more important to take the time to do the right things to maintain good credit.
You can do this by:
- Paying your bills on time. That’s certainly the case for any credit or loans you may have, but you should do the same for all the other monthly bills like gas, electricity, mobile phone contracts and catalogue accounts. Some of these on time repayments may be reported to the Credit Reference Agencies, helping you build a good credit history.
- Paying more than the minimum amount requested on your credit card statement. It needn’t be a huge difference, but if you only ever pay the minimum it could take a long time to pay off what you owe and cost you more as interest will continue to be added on a daily basis.
- Not exceeding your credit limit. You may be charged an ‘Overlimit Fee’ (Usually £12), creating an even larger minimum payment required for you to pay the following month. If you exceed your credit limit then that too may be reported to the Credit Reference Agencies and be noted on your Credit History, damaging your Credit Score.
There are other things that can help too:
- Register on the electoral roll, even if there are no elections in the near future or if you aren’t allowed to vote in all elections. For more information on how to do this, go to ‘Register on the Electoral Roll’.
- If you have had a long relationship with your bank, approach them first to see what they can do.
- Your employment history is also significant as lenders want to see if you are able to hold down a job or if there are periods of unemployment.
- Lenders will also look to see how often you move and whether you rent or own. So try to stay living in the same place for as long as you can.
- Having an electricity or gas bill, telephone, cable, or water service account in your name also helps. Just having your name on these accounts won’t establish a good Credit Score, but it can be helpful for first-time borrowers, especially if you pay by monthly direct debit, in establishing a track record of regular payment.
- Stop applying for credit cards in the short term. Leave three to six months between applications and look at providers of credit cards for people with poor credit history.
These are also lenders who specialise in cards for people with less than perfect credit histories.
Sometimes none of these routes proves successful. You may have only recently moved to the area or the country and may have changed banks several times. In which case, there are providers that can offer a ‘Non Status’ credit card that takes account of the fact that you don’t have a credit history.
Since there's no way you can avoid a credit check, if you want a credit card and you know you have no credit history at all, it might seem to be a waste of time applying for any credit card. However, some credit card providers will consider people with no credit history. These cards can help you to establish and build your credit rating over time by demonstrating that you can manage credit successfully.
Although acceptance can never be certain, you do stand a much better chance of success with these cards. They do charge higher than usual interest rates between 29.9% and 59.9% APR (Annual Percentage Rate) and the credit limit that may be quite low at least to begin with. However, a higher APR and slightly lower credit limit is probably worth it for a credit card that will help you establish a sound credit history and allow you to get much easier access to credit in the future. In due course, you’ll then be able to apply for regular credit card deals.
- Check your Credit Record
- Register on the electoral roll
- Ensure that you have utility bills and other bills in your name at your address
- Approach your bank to see if they can help
- Leave 3-6 months between applications