Quick credit score question

Ian_875

Well, I say quick...

I've searched the internet high and low for answers to two questions, but have come up fruitless. Hoping someone can give me a hand.

Let me outline my situation first.

- I'm a 26 year old graduate
- I work full time, and have done for the last couple of years
- I'm married
- I'm a tenant
- I have never had any debt (other than student loan and student overdraft, although I've never gone over the overdraft limit)
- I've never had a credit card

Recently I applied for a £5k loan from my bank to purchase a car, for which I was declined.

I popped into the bank to ask why and they said it was because I had no credit history. To rectify this they suggested I get a credit card and make small payments here and there, paying the full balance off each month via direct debit, which I happily signed up for.

Now, my two questions are...

1. What is the quickest way to build my credit score? Doea it go by how much I spend each month, or is it more about quantity? For example, is it better to have 10 separate purchases of £10 each, or one purchase of £100 or does it not matter either way as long as I pay it off each month?

2. According to experian my credit score is currently 905, which I gather is good, but I have no credit history so its not really a worthwhile score. How many months should I leave it before reapplying for a loan after getting my credit card. If I tried again in a month, for example, would I still get declined?

stator

I would leave it 6 months to build up a credit history. Maybe 3 until the CC starts to have a small effect. AFter 1 month I don't think it will have an impact, they won't know if you are responsible or not.

It doesn't matter how many transactions you spend on your CC, they only see your monthly balance (Although don't use the cash machine facility, that does look bad).

Just because you were turned down by one bank doesn't mean you will be turned down by others. You may find car finance easier to get, but it may be more expensive.

Get hold of your three credit reports, you may find other items are listed on some reports and not others, eg phone contracts, utility bills, so some lenders might think you do have a credit history, kind of.

I pressume you are on the electoral roll. Other good factors are being at the same address for a long time and having your bank account for a long time.

Ian_875

stator wrote: »

I would leave it 6 months to build up a credit history. Maybe 3 until the CC starts to have a small effect. AFter 1 month I don't think it will have an impact, they won't know if you are responsible or not.

It doesn't matter how many transactions you spend on your CC, they only see your monthly balance (Although don't use the cash machine facility, that does look bad).

Just because you were turned down by one bank doesn't mean you will be turned down by others. You may find car finance easier to get, but it may be more expensive.

Get hold of your three credit reports, you may find other items are listed on some reports and not others, eg phone contracts, utility bills, so some lenders might think you do have a credit history, kind of.

I pressume you are on the electoral roll. Other good factors are being at the same address for a long time and having your bank account for a long time.

Just to answer those few questions.

I won't ever use the cash machine with it, the lady at the bank explicitly outlined the pitfalls.

I was thinking a loan was the better option rather than get a car on finance. The reason being is that if I buy a car outright its mine to sell if the need comes up.

I'm wary of trying to put in other loan applications as I ready doing that in a short space of time could make me look desperate for cash and knacker my chances for a bit

I'm on the electoral roll as of a few days ago. I moved into this house in July, having been at my previous address for 12 months, (crappy landlord/cowboy builders made me move once the tenancy was up to save my sanity) and forgot to register. That's on its way to being sorted though. Prior to my last address, I lived in a rented flat for 5 years.

The reason I'm so eager is I FINALLY have my driving test in a few weeks and was hoping to buy my first car just after Xmas, assuming I pass obviously.

YorkshireBoy

You need to check all 3 CRAs have you listed on the ER. If you've only registered recently the details aren't generally passed to the CRAs until December.

It's not clear if you already have the credit card? If you don't (because the bank didn't give you one), you may have to start with a credit builder card (Vanquis, Aqua, etc).

How much have you saved already out of your two years' salary to put towards the car? If it's not a lot, what will have to give to enable you to meet the repayments on the loan when/if you get it? Or maybe you've recently had a promotion and a payrise?

stator

If it's your first car buy a banger. £500 job, 1.0 engine, keep the insurance low
I understand what you say about car finance and you are correct, it's just an option.
I would wait a few months at least, the electoral roll issue would have hurt your chances, building up your credit history with a small CC will help too.

Ian_875

YorkshireBoy wrote: »

You need to check all 3 CRAs have you listed on the ER. If you've only registered recently the details aren't generally passed to the CRAs until December.

It's not clear if you already have the credit card? If you don't (because the bank didn't give you one), you may have to start with a credit builder card (Vanquis, Aqua, etc).

How much have you saved already out of your two years' salary to put towards the car? If it's not a lot, what will have to give to enable you to meet the repayments on the loan when/if you get it? Or maybe you've recently had a promotion and a payrise?

I've not saved anything sadly, wife has been working freelance for the last year or so, so most of my wages go towards bills and driving lessons. She's now got a job though, so I can comfortably afford a monthly repayment on a £5k loan (about £100 a month over 5 years)

YorkshireBoy

Taking 5 years to repay £5K for a depreciating asset would scare the hell out of me...especially at your age and with your circumstances.

But I'm sure you don't need a lecture, so good luck with it.

thebritishbloke

You will likely not be accepted for a loan until you're on the electoral roll, and even then you'll need some decent history to get accepted, especially for the best rates.

Use your credit card for your day-to-day purchases (never spend more than 30% of your credit limit) and have a direct debit set up to pay it in full every month. In 6-12 months time, have a go at applying for a personal loan again.

I agree with YorkshireBoy that £5k over 5 years is quite a ridiculous sum. Given you have no other debt, you'd expect most people to be paying that over 2-3 years maximum.

You're more likely to be accepted for car finance than you will be for a personal loan. One more application won't hurt, just make sure you aren't getting stung with a load of interest and don't jump at it just because they've accepted you.