Credit Card = Credit Rating??

LittleStar

Hi All,

Just wondering ... do I need to have a credit card to get a good credit rating? As my mum keeps saying that I need to build up a credit history to be accepted when applying for a mortgage etc ... is this true? Is there any other way to build up a credit history?

Many Thanks xx

CLAPTON

basically if you are going to lend someone money the most important thing you want to know is that they will pay it back, on time and within the T&Cs.

One of the easiest ways of seeing this is to see whether the debtor has paid back previous loans in a proper fashion.. so for someone to give you a credit card, most creditors want you to already have one and for your credit record to show a record of paying back acccording to the T&Cs.

Now you dont actually need a credit card but its the most common form of credit and usually shows up on your credit file and if you use it regularly will show a consistant pattern of repayment. Other forms of credit dont always show up on your file.

Mortgages are somewhat different because they are a secured loan and the lender is more likely to be concerned about your deposit and the value of the house in relation to the mortgage and also the affordability but a good history of repaying credit is considered a good sign.

why not get a copy of your credit file and see whats there. a completely empty one is generally not considered very good.

why dont you get a CC, use it regularly for an essential buy (say petrol if you drive), set up a DD for the whole amount of the CC bill. This will give you an excellent credit trail.

LittleStar

Thanks for that CLAPTON ... thats very helpful! ... I'm only 21 and a poor student, so I don't think i've actually got a credit rating ... I have a next store card that I use everynow and again (online when I shop online as that is all they accept) and I pay it off as soon as the bill comes through ... would that count as some form of credit rating? ... I wouldn't be silly with a credit card as im paranoid about them ... you hear so many bad things ... but if I was sensible and only used it on petrol or something do you think it would be a good idea? Many thanks

o_t_e

Hi Littlestar - the next card is likely to be on your credit file - the other thing you can do is make sure you are on the electoral roll as this also appears on your file. If you are a student, and have an established history with your bank it might be worthwhile applying with them for a credit card.

As Clapton says Mortgage decisions are more involved, but having a credit file that shows a financial history and history of residence will help in that regard.

LittleStar

Thank you o_t_e ... i've been with my bank for 5 years now, I have regular income (from part time job) and always have funds in my account and also save regularly ... so would that be part of the history with my bank? They do offer a student credit card (Natwest) ... but I was a bit cautious as when I went to sign up ... they wanted to set up a direct debit ... which is cool ... but only to take the minimum repayments, no other option ... so I was a bit worried cos surely you would get into a mass ammount of debt by not paying it off in full ... and nowhere else will give me one where im a poor student lol

The_Boss

Maybe apply for one more card and that will build up more of a profile. Do you have a part time job as well as your studies?

Just in case you were wondering - student loans dont show up on your credit record. Which is a shame in my opinion.

The_Boss

Ahh, posted that you do have a job just as I was posting

You dont have to spend loads on each card - just pay for some shopping and pay it off in full to avoid interest. You'll help build up an excellent profile that way.

LittleStar

Thanks The Boss ... So is it definately a good idea to get a credit card ... because my mum was saying yes! ... is wasn't too sure and a bit scared ... and my bf was saying NO WAY! lol ... so just a bit confused lol

I think I will get a CC or another store card ... as I know I wouldnt be silly (I know some people get tempted ) ... Thanks again x

The_Boss

Get a credit card rather than a store card because then you can use it everywhere as opposed to just that store - very useful if you are disciplined. I bet your bf wont think its such a bad idea if you buy him a nice present with it!

LittleStar

Hehe ... well thats one way of to bribe him and convince him its a good idea ... Thank you for your help The Boss ... I'll start looking round ... hopefully natwest will give me their normal CC not the student one ... thanks again x

CLAPTON

and if you ask most (all?) CC will set up a DD for the full amount even through you often have to ask explicitly... I'm not sure about natwest.

and presumably you always pay your store card off in full..the interest rates on store cards are usually truely awful.