Building a credit rating, turning 18

Plxply

Hello,

Within the next few months I will be turning 18 and apart from considering all the standard things such as university and the potential for employment I'm looking into the best way to build up a credit rating early.

I currently have two current accounts, one with HSBC which I would have had for 4 years when I turn 18 and one with Lloyds TSB that I would have had for 1.5 years when I turn 18. However, most of my money is stored within Lloyds and I transfer money to my HSBC account only when I am planning on purchasing something.

Over three months the turnover on my HSBC account is around £300 with my Lloyds account having a turn over of around £400 every three months. The HSBC account is kept with an extremely low balance around £20 however I constantly have around £400 floating within my Lloyds account.

When I do turn 18 which bank would it be best to apply for a credit card with? Would it be better for me to apply for a card such as the Capital One Classic or other high interest cards?

I currently do all my spending on my Visa Debit card which is linked to my HSBC account as such I plan to use a credit card to replace my Debit Card (allowing me to pay it off in full each month).

Furthermore, how long should I wait after I turn 18 to apply for credit? I have sent the forms off to be entered into the electoral roll however as I understand you are only placed on when you are 18 and it can take some time for this to happen.

Thanks for your advice in advanced,

BobQ

In an ideal world you would build up a good credit record by managing your affairs without taking out a credit card or any other form of credit. But in the real world experience of using a credit card or other credit agreement, getting into a small amount of debt but managing it responsibly seems to count in your favour.

It probably does not matter which institution you have a credit card from, what matters is the record you build up using it. If you feel there is some possibility you will be refused a credit card it may be better to go to one of the institutions that can readily see you have been managing your affairs responsibly.

Not sure why you feel the need to have two current accounts.

Plxply

The reason for owning two current accounts is due to the fact I rely on my debit card. So if for any reason my HSBC debit card is cancelled I always have my Lloyds card to fall back on.

My main concern is turning 18 and applying for credit within a week, then the lenders seeing this as some kind of attempted run for "free money" or something. Especially if I attempt to apply for HSBC get declined, Lloyds declined and then I try with Capital One and they see the two previous search markers.

CLAPTON

your parents ought to have already put your name down for the electoral roll.... they should have put anyone living in the property down who is 17 or over on the form.... ask them if they did
no harm in checking however.


very very sensible to have at least two current a/cs for the reasons you have already given
this is especially true when you start to travel abroad; it's quite common for a debit card to suddenly stop working in awkward circumstances (I never travel without 3 debit cards and three credit cards)

I would wait a few months after turning 18 before applying for credit card; start by trying either of your banks; if they refuse then wait a while and try the other

if you are going to Uni next year then apply for a student a/c (or convert one of your current ones) then they may well offer a CC as part of the package

in any event do not use the CC as free money; set up a direct debit for the full amount so you never forget to pay and never incur any interest

good luck

chanz4

You bank may not issue a card when you have jsut turned 18, other than with a student account. Barclays for sure wont.

Plxply

CLAPTON wrote: »

if you are going to Uni next year then apply for a student a/c (or convert one of your current ones) then they may well offer a CC as part of the package

in any event do not use the CC as free money; set up a direct debit for the full amount so you never forget to pay and never incur any interest

I've sent off my UCAS application and I'm currently waiting for replies from Universities. However the problem is that if I'm given a conditional offer than I would have to wait until August to get my results whereas I'm turning 18 in December. What would be the optimum time to apply after my birthday? 3 months? 6 months?

Thinking about it I don't think I will carry a balance on the cards at all (hopefully) and interest isn't too much a worry. Would it be a good idea to immediately go for cards like Vanquis and Aqua or see if my bank views me as a suitable borrower? The banks will have more history on me and my account management whereas Vanquis and Capital One will have none, however they give higher interest rates so I'm unsure what would be best.

CLAPTON

there is no rush to get a credit card

only consider getting one if you are sure you will NOT carry a balance; if you are not sure then just don't get one

it's not long to wait until summer and you get your a/l results and then you can get a student bank a/c; as I say they often offer a CC.

if you are determined to get a CC before summer, then only make one CC application : if that fails then wait until summer; there is no rush

Plxply

CLAPTON wrote: »

only consider getting one if you are sure you will NOT carry a balance; if you are not sure then just don't get one

Don't worry, I will follow the pay off in full each month guidelines fully. I will have a low credit limit anyway plus I can remove money from my cash ISA if I need to however that should never need to be done.

skintdad

i would avoid applying for a credit card at this stage in your life. if you really think you should have one to build a score get one from your own bank (the one that most of your income goes into). use it once and pay it off in full after your 1st statement. then give it to your parents to look after until you need it in an emergency. arrange with them to access it to make an occasional purchase on it every few months and pay off in full again each time. my friends were all at uni before you had to pay fees, they all worked part time, and all finished with debts in excess of £15k. one of them £40k!!! most of it was spent on alcohol, clothes and junk food and much of it on credit cards. the best money advice i can give you is to save 10% of your earnings for the future (no matter how small), if you can't do this then you need to look at your spending and see what is necessary and what isnt. trust me when you want to buy a house or have a OH and kids to think about you will thank me for this advice

amorge

I agree with skintdad - avoid getting one at 18. It's all very easy saying you'll pay it off every month but realistically that doesn't always happen. However if you feel you have to have one I know some student accounts have the facility of applying for a CC. Really do think long and hard about it though.

bouncydog1

My DD has recently gone to Uni so her experience may assist you. She has banked with HSBC for many years and has demonstrated regular savings over the period.

She was declined for a normal credit card because she did not have employment and regular income from employment - I think they advised that the minimum income for a cc under normal rules was £10k. However the bank were happy to offer a credit card with a £500 limit (which she pays off in full by DD) as part of her student account when she went to Uni. You have to have your confirmation letter to open the account so you can't apply before results come out.

We have also put her as an authorised user on one of our other cc accounts, which won't help her credit profile but does give us as parents the assurance that she has access to emergency funds e.g. ability to pay for flights home etc.

I'm afraid I don't agree with skintdad, because you can have very responsible finance savvy 18 years olds and idiots in their 50's who can't manage their money!

You could also post on the student thread when you have decided about Uni because there are lots of tips on there about not getting into debt and managing your money.