How to build credit history with no loans, cc or bills?

idkwhattosay

Hi,

I read through about 30 pages on this subforum and I didn't find what I was looking for, apologies if this was answered before.

I would like to build credit history so I registered on the electoral roll (still waiting confirmation) and I had a small personal loan (£1000@1year) which ended this May. Payments were taken from my account on 1st of each month - I don't know if that counts as payday loan?

So, apart from that tiny loan I never had a credit card and I rent a room so I don't pay any utilities and I also have a PAYG SIM. I'm trying to figure out what to do here since I started saving money for deposit (I can save between £900-£950/month on £25k salary). Around this time next year I should have some £12k saved which would be my 10% deposit.

Now after reading through the Mortgage section of MSE I'm scared to my bones. I don't understand why the banks make you jump through hoops like that, it's not like they give you the money for free! You pay through your nose for that loan. Anyway, do you have any suggestion?

Do I need to take another loan, say £5k, and repay it in two years just to build credit history? Can I take that loan and withdraw the money and keep it somewhere safe or do I need to provide proof that I spent it on something?

I'm willing to get a mobile contract but I would really like to avoid wasting money if possible. What should I do? Is it rational to expect to build credit history in a year?

[Deleted User]

Don't take loans you don't need.

Try your own bank, or someone like aqua or Vanquis and get a credit card. Use it regularly and pay it off in full each month to demonstrate responsible borrowing.

Banks want to see that you will repay you - after all, they may not be planning to give you the money for free, but they know there's a lot of people who won't pay it back.

idkwhattosay

Thanks, so would having a credit card be enough then? I guess I can't substitute it with anything else can I?

[Deleted User]

It's the easiest and cheapest (ie free) way.

What's your concern?

idkwhattosay

My concern is having a burden I don't need such as paying maintenance fees and interest on purchases which I could avoid by not having a credit card. If that's my only option then I guess I'll have to get it.

[Deleted User]

Most credit cards have no annual fees and if you repay in full each month you'll pay no interest. There is no cheaper way of building a credit history. Much better than your alternative of getting a loan.

owlet

When using a credit card to build a history , make sure you set up a direct debit so that you pay in full each month & you won't pay interest or fees. Just use the card to pay for a few things that you would normally buy anyway, petrol, food etc, up to maybe £50 -60 a month.
If you set up the direct debit, the payment will be taken at the right time because it's important to wait until your statement has been generated before paying. If you stick to that, then you won't have any problems.

Thrugelmir

Take a look at the Nationwide's Save to Buy scheme. Building a reputation can be done in different ways. Regular saving is one.

idkwhattosay

Thanks everyone for good advice.