Debt virgin: Should I build a credit history, and how?

waka

Hi. Im a first-year university student with a student account, a fair bit of savings I've accumulated over the years in a savings account, and thanks to thrifty living I'm ending every uni term with a surplus from my govt-provided student loan, which im saving.
I've never used debt products before (except the student loan), and I've always preferred to save for what I want (or to continue saving) rather than borrow, or spend whatever's coming in. However, I know that at some point in my life I'm going to need a large debt package such as a mortgage, and I've heared that the biggest obstacle to first time house-buyers currently is mortgage applications being rejected.
I've been wondering if getting a credit card, to begin my credit history, is worthwhile. However, my instinct would be to get one, occasionally use it, and keep it paid-off, thereby avoiding losing money in interest.

However, the advice on this site regarding credit cards is that a credit history showing an individual always pays off before interest is incurred is a turn-off to companies, because, although they're reliable and safe, they can't turn a profit on such a person.

In light of the above, is it worth getting a credit card at this stage? Is a whiter-than-white credit history worse than no history at all?

Tixy

Hi

Having a card and paying it off in full and not incurring interest is a good thing on your credit file not a bad thing. It seems to be a misconception that other potential lenders would see this as a negative as your lender isn't making money out of your use of the card - in fact they are as they'll receive transaction fees everytime you use the card anywhere (these fees are usually paid by the retailers of course).

The other advantage of a credit card is that if you do need to make a purchase of over £100 you'll get the benefit of section 75 protection.

You sound like you are pretty organised financially and so would be likely to keep proper control of the card and not run up debts and interest charges etc.

I suppose as you are a first year student then in terms of your credit file it probably wouldn't matter if you waited another year or so before starting to get yourself a positive credit history but if there is any chance you might use the added purchase protection then I'd say go for it.

drewwhonumba2

Hi Waka,

Often people are refused any kind of credit because of no history whatsoever. You are in a fortunate position because as a student with a clear credit history you are pretty much guaranteed to be accepted for a student credit card or overdraft.

As mentioned above running your credit card clean each month will look great on your credit history, although i actually do believe that with credit cards by allowing them to take a little interest you are more likely to get limit increases. However, in terms of your mortgage application the fact that you pay your debts in full each month will look excellent...its is a different kind of debt and they will earn interest and expect you to pay on time the agreed amount each month.

I was nowhere near as financially savvy as you when i was in uni and basically took any credit that i could get my hands on. However if you can manage your credit as well as you manage your finances then now is a great time to take on a credit card and maybe even an overdraft.

NorthwestLL

Contract mobile phone is a good way of getting a bit of credit history.

scottishblondie

I took a card with my student account in 1st year and used it for normal spending - always paid it off. I've never had any trouble getting credit even tho I'm still a student (aside from an incident which resulted from a bank doing 4 credit searches from the same application!!), and currently have 3 credit cards with very respectable limits. All without paying a penny in interest. But they do make plenty off of me in merchant transaction fees, as I use a CC to pay for everything I buy rather than my debit card. I'd definitely recommend getting one, just ensure that you use it wisely and all will be well.

Sorilla

NorthwestLL wrote: »

Contract mobile phone is a good way of getting a bit of credit history.

And paying it off every month with credit card!