Will getting a credit card help or hinder my rating?

kkid

I am 18 and as I have no credit rating really at the moment (Equifax showed no number for me ) I wanted to get one to make financial arrangements easier in the future.

I was thinking of getting a credit card and buying all of my small things using it and paying off immediately. I have heard people say that this is good for a credit rating (Although these are just your average everyday person). I read online though that this is obviously not the type of person a lending company wants and therefore doing this could lower my score.

Could I have some insight please?

Is it worth getting a card?

greenlightluke

Hi,

I'm 20 years old and took a credit card when I turned 18 through my own bank - I got a Halifax Clarity with a £600 limit. I use my credit card for EVERYTHING, no matter how small or large the purchase, and pay it off at the end of every month.

Don't be afraid of a credit card when they are used and paid off they are very effective, being able to use credit and showing lenders that you can manage credit will open up doors - mobile phone contracts, overdrafts etc all contribute to being a worthy lender. So when it comes to mortgages, and finance agreements you look like a great lender.

Over 2 years and after showing banks I can handle credit I decided to get a CC that offered me rewards/cashback and now have an AMEX Platinum Cashback and a Barclaycard Freedom Rewards.

Don't expect to get the absolute best rates, get what you're given, use it, pay it off.

1) Check with your own bank first
2) Try Captial One, Aqua, Vanquis if step one fails
3) If you get a CC, use it and pay it off.

MrJames1980

Yes, if you get a credit card, use it and pay off the full balance every month your credit score will increase.
The only reason is would adversely affect your credit is if you miss payments.

If you have no credit card, or any bills in your name, ie phone contract, gas bill etc - then your credit score will not increase as you will have had no history.

kkid

I have no other financial products, not even a phone contract as I am PAYG (Ovivo ) Hence why I NEED something to help my credit.


I still can't understand why credit card companies would see me as a better customer though, if anything I am less likely to give them money by paying off in full.


When choosing a card, the interest rate is irrelevant to me, right? Considering it SHOULD never affect me as long as I do not become stupid. Should I only really go off who will be willing to give me one?

matttye

You don't have a 'credit score.' Not any kind of centralised one, anyway.

When you borrow money, lenders report the conduct of your accounts to credit reference agencies. It is the information in these credit reports that is important for you to consider.

Credit reference agencies sell 'credit scores' that they generate based on the information in your reports, but they generate these scores in the absence of information such as whether you are employed/on benefits and how much you earn. Clearly those scores are useless.

Lenders will score you based on their own criteria when you apply for something. The scores sold by the CRA's are not the same as the ones generated, nor are they actually seen, by lenders. You'll never know how a lender 'scores' you and usually they'll just give you a standard brush off such as 'check your credit report' if you get declined.

Getting a credit card and paying it off in full is a way of improving lenders confidence in you.

They will weigh up risk vs. how much money you're likely to make them. If you don't always pay off in full, then you'll pay interest and this might make you slightly more attractive to lenders. My understanding is that they get paid a small % every time you use a credit card anyway, so they still make money even if you pay off in full every month.

kkid

matttye wrote: »

You don't have a 'credit score.' Not any kind of centralised one, anyway.

When you borrow money, lenders report the conduct of your accounts to credit reference agencies. It is the information in these credit reports that is important for you to consider.

Credit reference agencies sell 'credit scores' that they generate based on the information in your reports, but they generate these scores in the absence of information such as whether you are employed/on benefits and how much you earn. Clearly those scores are useless.

Lenders will score you based on their own criteria when you apply for something. The scores sold by the CRA's are not the same as the ones generated, nor are they actually seen, by lenders. You'll never know how a lender 'scores' you and usually they'll just give you a standard brush off such as 'check your credit report' if you get declined.

Getting a credit card and paying it off in full is a way of improving lenders confidence in you.

They will weigh up risk vs. how much money you're likely to make them. If you don't always pay off in full, then you'll pay interest and this might make you slightly more attractive to lenders. My understanding is that they get paid a small % every time you use a credit card anyway, so they still make money even if you pay off in full every month.

ah ok then.

Will getting a credit card affect my chances of opening up bank accounts?

I plan to open up two bank accounts soon (There is a reason for this, explained in another thread). I don't want getting a credit card to affect my chances of being accepted for these bank accounts.

matttye

kkid wrote: »

ah ok then.

Will getting a credit card affect my chances of opening up bank accounts?

I plan to open up two bank accounts soon (There is a reason for this, explained in another thread). I don't want getting a credit card to affect my chances of being accepted for these bank accounts.

Yes, but likely only because too many credit searches in a short time can make you look credit hungry.

One, two or even three searches isn't too bad, but the idea is to try to spread applications out and don't just keep applying for different accounts because you got rejected for others that you applied for.

Are you on the electoral roll at your current address? If not, I'd get on this because you make any applications as it will massively improve your chances.

matttye

Just read your other thread. If you need the student account the most, apply for that first, but preferably get on electoral roll first if you're not already.

After that it's up to you which order you do things.

kkid

I am on the electoral roll, yes.

I'll just do it in order of importance to be on the safe side then.

Student account > Halifax current account > credit card

YorkshireBoy

kkid wrote: »

I'll just do it in order of importance to be on the safe side then.

Student account > Halifax current account > credit card

So you don't want a credit rating as much as you want £5 per month?