Long Term Credit Building Strategy?

TheTruth1

Hi everyone

I'm new to the forum. I am a British national who has just returned to the country after leaving to live abroad at the age of 17 (I am now 26).

I am now on a long term mission to build a decent credit history for my self from scratch as I have none whatsoever. I've never had credit in this country and I don't think I have ever been on a the voter's register prior to leaving back in 2002 so as you can imagine getting credit has been a nightmare. Here is my story so far and the plan.


- November 2010 I applied to be registered on the voters register. I understand that this is fundamental in getting credit anywhere

- I have been in full time employment as of February this year and earn approximately 1500 a month after tax.

- After confirming I was on the register earlier this month I thought I'd try and get myself a bank account, and managed to get an advance account with HSBC just earlier this week. This will come with a Visa debit card which I'm quite pleased about.

- I don't think I will qualify for a even a Capital One Classic or a Vanquis so I've decided to go for a Freedom prepaid Mastercard with the Credit Booster option which should add some worthwhile regular payment history to my credit report. I'll get one of these and look toward trying out for a Vanquis/Capital One after 12 months.

After contacting customer services of Freedom and Cashplus (both of which offer the same credit boosting option) I've decided to go for the Freedom card because unlike Cashplus they update your credit file as soon as your first monthly payment has been made where as Cashplus only updates your credit file 90 days after you get your card. Also the Freedom card is about 1 pound a month cheaper at £3.95. I'll do this within the next 2 weeks.

- I am due to come into about £10000 sometime next month and plan to initially place it into my HSBC savings account (the savings account came with the Advance account) I am hoping to try and build a good relationship with HSBC and I hoping this will help some how.

- In June I plan to try and get a mobile phone contract. I am sooo scared of being rejected for credit and this showing on my file so I am going to go for something very basic. After doing some research it seems 3G are the easiest to get credit with so I plan on sign up for their Sim Only 1 month rolling contract for £10.

I'll probably try and upgrade to a better contract on another network sometime later?

- Come September I will apply for a catalogue. I read somewhere here on the forum how someone signed up just to buy something for a fiver and paid it off immediately, and this showed up as a nicely on his file.

- Next year, February 2012 I'll apply for a Vanquis/Capital One card and hopefully a year of regular payments via phone contract/prepaid card/catalogue and being on the voters register since 2010 should be enough to get me accepted.

- Summer 2012 I will apply for a HSBC credit card. (Although the guy who opened my Advance account did say I should come back and apply in 3 months, I know I'll be rejected so I'm not going to bother)


So that's as far as I've got. My ultimate aim is to get a mortgage at least at around the age of 32/33 and possibly finance about 5000 to get a car maybe 2 to 3 years from now. So here are my questions to any one that can give me some help and advice

1. What do you guys think of the plan?

2. I am contemplating maybe taking out 2 prepaid cards instead of 1 to double the amount of good payments shown on my credit file. They don't do a credit check for these cards, just an I.D verification so I think getting 2 different prepaid credit booster cards may be a good idea. What do you guys think?

3. Is there any way I will be able to use my 10000 in savings to improve my credit rating or improve the relationship with my bank?

4. How likely would it be for me to qualify for a Vanquis/Capital One classic credit card in about 12 months time?

5. How likely would it be for me to qualify for a HSBC credit card in about 16 months time?

6. Any thoughts or ideas on any other ways I could improve my credit that I may not have thought of?

Thanks in advance guys!!

capitaine

Hmm good questions, i'm in a similar boat to you. I'd be intersted to know the answers too

Tixy

1 - I'd say a pretty good plan overall, sensible long term strategy.

2 - not sure it will make much difference. As i understand it another lender will see these as a loan of £60 (or so) that has then been repaid over a year - so its likely they will guess exactly what this account is anyway, so having 2 might not make much difference.

3 - once you have some savings and are using your account regularly it should increase the chance they will give you a credit card. I would consider applying sooner than the 12months actually (one extra credit search on file won't make a huge difference and remember even if you are declined no other lender looking at your file later would know this.
Does your hsbc advance account have an overdraft facility yet?

Not totally sure on the others - it might be that in the terms of one or more of the others that you have to be able to produce 3years of UK addresses - worth looking into that before you apply I'd say.

Toe-Jam

TheTruth1 wrote: »

1. What do you guys think of the plan?

2. I am contemplating maybe taking out 2 prepaid cards instead of 1 to double the amount of good payments shown on my credit file. They don't do a credit check for these cards, just an I.D verification so I think getting 2 different prepaid credit booster cards may be a good idea. What do you guys think?

3. Is there any way I will be able to use my 10000 in savings to improve my credit rating or improve the relationship with my bank?

4. How likely would it be for me to qualify for a Vanquis/Capital One classic credit card in about 12 months time?

5. How likely would it be for me to qualify for a HSBC credit card in about 16 months time?

6. Any thoughts or ideas on any other ways I could improve my credit that I may not have thought of?

Thanks in advance guys!!

(1) I think your plan is good , but a little over cautious in places.
(2) You don't need 2 prepaid cards, don't waste money unnecessarily
(3) You should put this in and ISA immediately, the deadline is 4th April ! That way you will get tax free interest on the funds. Having it with HSBC will boost your score with them, but it is not the best rate.
(4) After 6 months with HSBC your internal score will be good enough for a credit card with them. Just wait and pay money in every month and the system will update on the 7th month. You will probably be offered an overdraft also at the same time. Do a search on here for HSBC internal scores.
(5) Again overly cautious. You should get a capital one card in 6 months easily. And HSBC should be the same.
(6) A sim only mobile contract looks exactly the same as a full contract on your credit file.

Don't go an an applying spree it will really damage your file. limit applications to 2 per month.

Atom

I would think 2 per month would be a bit much mate - that would be 12 in 6 months, i thought 3 in a 6 month period was "just" acceptable.. 12 would make you look desperate and searches have a big impact depending on how many,

TheTruth1

Tixy wrote: »

1 - I'd say a pretty good plan overall, sensible long term strategy.

2 - not sure it will make much difference. As i understand it another lender will see these as a loan of £60 (or so) that has then been repaid over a year - so its likely they will guess exactly what this account is anyway, so having 2 might not make much difference.

3 - once you have some savings and are using your account regularly it should increase the chance they will give you a credit card. I would consider applying sooner than the 12months actually (one extra credit search on file won't make a huge difference and remember even if you are declined no other lender looking at your file later would know this.
Does your hsbc advance account have an overdraft facility yet?

Not totally sure on the others - it might be that in the terms of one or more of the others that you have to be able to produce 3years of UK addresses - worth looking into that before you apply I'd say.

Thanks Tixy.

Your point about the prepaid cards area good one. Lender's will probably work out what they are so 2 would be a waste of money. I'll stick with just the one.

In answer to your question, I was not given an overdraft facility on my account. It'll probably be a good idea to apply for one in a couple of months I guess?

I've also heard of the 3 year uk address history issue some where. I'll have to try and find out some more information about this. I guess If I do manage to get a HSBC credit card before the 12 months and put some good history on that, I will be in a better standing.

TheTruth1

Toe-Jam wrote: »

(1) I think your plan is good , but a little over cautious in places.
(2) You don't need 2 prepaid cards, don't waste money unnecessarily
(3) You should put this in and ISA immediately, the deadline is 4th April ! That way you will get tax free interest on the funds. Having it with HSBC will boost your score with them, but it is not the best rate.
(4) After 6 months with HSBC your internal score will be good enough for a credit card with them. Just wait and pay money in every month and the system will update on the 7th month. You will probably be offered an overdraft also at the same time. Do a search on here for HSBC internal scores.
(5) Again overly cautious. You should get a capital one card in 6 months easily. And HSBC should be the same.
(6) A sim only mobile contract looks exactly the same as a full contract on your credit file.

Don't go an an applying spree it will really damage your file. limit applications to 2 per month.

Thanks for your reply Toe Jam

Unfortunately I will not get the 10 grand before at least the 10th of April so will definitely miss the ISA allowance. HSBC's rates a actually quite bad compared to others I've seen but I'm not too fussed if it boosts my internal credit score with them.

A 6 month wait sounds like a good idea to me, maybe I am being over cautious :undecided

I did read a couple of post about HSBC's internal scoring an it's made me a lot more optimistic. For someone in my situation it seems if I keep my account in good standing for 6+ month I'd probably be more likely to get a cc with HSBC rather than Cap1/Vanquis? Tixy made a good point about having at least a 3 year Uk address history so this may be an issue with applying for these cards?

Thanks again!

KingElvis

Credit searches mess less after 3 months and not much after 6 (unless you have 10s of the critters)

I would deffo apply now for a Crap1 Classic or do the pre application form on Barclaycard's website, it leaves no credit damage and is a good though not perfect indicator.

https://letmechoose.barclaycard.co.uk/

Don't be scared of applying for stuff but don't be reckless either.

Good luck.

TheTruth1

Hi King Elvis

I'm relunctant to apply now for Cap1 or Barclay initial after reading a post on a thread here where someone in a similar position to mine (less than a year uk address history) was a refused a Cap1 and a Vanquis card and only asked for a 200 limit;

"...It's a "no" based on my credit history or lack of it "using statistics to predict the way an applicant might use a credit card". And Experian and Equifax..."

Barclaycard Initial are supposed to be more difficult than Cap1/Vanquis cards so I'm not sure there's any point giving it ago. :sad:

chexum

3 years of address history is often stated as a criteria for credit, it's actually for proving residency. It's coming from HMRC's guidelines for being ordinarily resident, but in reality, that's not a hard requirement. (1)

In turn, however, many online applications won't let you even proceed before you specify all your addresses going back to 3 years. Some only insist on the previous one, and/or only if the current one is fresher than 2-3 years. Some provide a way to add the previous addresses abroad, but in my experience, if you use that feature, you have already lost.

If you had your old address for 6-12 months, and a current one for 6-12 months, it's often sufficient for the applications - in a way, you qualify for more if you have lived at one address for 7 months, and the current one for 13 months than if you have lived the same place for 2.9 years (after returning from abroad), which doesn't sound reasonable to me. It seems that after the three years, you're no longer significantly different from someone who didn't even want a passport.

The early few thresholds when your stability is improving appear to be 6, 12 and 18 months. If you had an account for 6 months, it's no longer fresh, so they may start to trust you with pre-approved offers. Addresses seem to get better after 12 months, and ultimately, credit accounts need to be at least 18 months old to confirm your stability for the other lenders.

Another guideline mentioned on the main site's credit checker that the "majority" of your accounts should be opened at least 18 months ago, so if you're able to get a card after 6 months of perfect account conduct (with an overdraft), then you're still thrown back a bit for 18 more months.

Mobile contracts are less strict (and count less), O2 for example, may require a £100 deposit instead of outright declining you for a £10 pm contract. You can then use up the deposit after 3 months.

(1) http://www.hmrc.gov.uk/manuals/cbtmanual/cbtm10020.htm
"If a person has already lived here for three years or more, it should normally be accepted that they are ordinarily resident. (This does not mean that people who have lived here for less than three years are necessarily not ordinarily resident. A person can be ordinarily resident from the first day they arrive in the United Kingdom if they have genuinely come to make their home here.)"

TheTruth1

chexum wrote: »

3 years of address history is often stated as a criteria for credit, it's actually for proving residency. It's coming from HMRC's guidelines for being ordinarily resident, but in reality, that's not a hard requirement. (1)

In turn, however, many online applications won't let you even proceed before you specify all your addresses going back to 3 years. Some only insist on the previous one, and/or only if the current one is fresher than 2-3 years. Some provide a way to add the previous addresses abroad, but in my experience, if you use that feature, you have already lost.

If you had your old address for 6-12 months, and a current one for 6-12 months, it's often sufficient for the applications - in a way, you qualify for more if you have lived at one address for 7 months, and the current one for 13 months than if you have lived the same place for 2.9 years (after returning from abroad), which doesn't sound reasonable to me. It seems that after the three years, you're no longer significantly different from someone who didn't even want a passport.

The early few thresholds when your stability is improving appear to be 6, 12 and 18 months. If you had an account for 6 months, it's no longer fresh, so they may start to trust you with pre-approved offers. Addresses seem to get better after 12 months, and ultimately, credit accounts need to be at least 18 months old to confirm your stability for the other lenders.

Another guideline mentioned on the main site's credit checker that the "majority" of your accounts should be opened at least 18 months ago, so if you're able to get a card after 6 months of perfect account conduct (with an overdraft), then you're still thrown back a bit for 18 more months.

Mobile contracts are less strict (and count less), O2 for example, may require a £100 deposit instead of outright declining you for a £10 pm contract. You can then use up the deposit after 3 months.

(1)
"If a person has already lived here for three years or more, it should normally be accepted that they are ordinarily resident. (This does not mean that people who have lived here for less than three years are necessarily not ordinarily resident. A person can be ordinarily resident from the first day they arrive in the United Kingdom if they have genuinely come to make their home here.)"

Hi Chexum, a great wealth of info here, many thanks.

It seems I realistically have at least a 2 year wait with perfect payment history before I'd be considered as stable and/or of good risk to lenders. My best bet seems to be with my bank HSBC so I'll probably have a go at applying for their cc in 6 months. In the meantime I'll work on keeping an impeccable record of behaviour on the account.

By that time I should have on my file the prepaid card payments, catalogue, and mobile phone contract. I know that HSBC have an internal score to assess if I'd be eligible for their cc so I'm wondering if their external credit check just looks for any history of defaults or outstanding debts.

I'm very interested in the o2 contract you mentioned, I had a quick look at their site and couldn't seem to find info on a tariff like that. Sounds perfect as I'm actually reluctant to go with 3g due to horror stories I've heard about their poor reception and service. Would you happen to have link?

Again, some great advice here, thanks.