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Is a credit card necessary to build your credit score? Advice needed

11 replies 241 views
thinfatwhitedukethinfatwhiteduke Forumite
56 posts
Third Anniversary 10 Posts Name Dropper Combo Breaker
Hi, I just wanted to ask if it's true that in order to apply for a loan I need to start using a credit card, otherwise my credit score (or credit history?) is bad or non existent.
I never owned one, but I pay my phone bills, my rent, and other services directly from my bank account. So I wonder if these things do influence my credit score.
If they don't, how many months of use of a credit card is necessary? And which credit card would you recommend me?
Thanks!

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Replies

  • zx81zx81 Forumite
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    It's not essential, but its the easiest and cheapest way.

    Any card will do.
  • On_my_wayOn_my_way Forumite
    405 posts
    Fifth Anniversary 100 Posts
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    Your phone counts on your credit rating too. Be very careful and don't get into debt.
  • edited 6 March at 12:10PM
    PRAISETHESUNPRAISETHESUN Forumite
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    edited 6 March at 12:10PM
    Without any form of credit history, lenders will be much more likely to reject you for any loan applications so it makes sense to start building your history up now before you actually need to get a loan. Any form of credit will do, although credit cards are usually the easiest and cheapest way to do this. Some utility providers report to the CRAs, but not all do. Rent generally isn't reported. Also, an obligatory note to make sure you ignore your credit "score" and instead focus on the actual contents of your credit report (the account info and payment history sections) since lenders do not see the numbers provided by the CRAs.

    Avoid any "credit (re)building" services - these typically charge you for doing something you can actually do yourself quite easily. The easiest thing to do is get a sub-prime credit card, and make a few purchases each month that you'd normally put on your debit card (grocercies, fuel, etc). Pay it off IN FULL every month. After 6-12 months of doing this lenders should start to increase limits and you should start to become eligible for better offers. See below for some good providers to start with - just keep in mind that you should do an eligibility check before you apply for anything, preferably from the actual providers website (rather than through a comparison site such as MSE): https://www.moneysavingexpert.com/credit-cards/bad-credit-credit-cards/


  • DCFC79DCFC79 Forumite
    38.4K posts
    Part of the Furniture 10,000 Posts Name Dropper
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    Hi, I just wanted to ask if it's true that in order to apply for a loan I need to start using a credit card, otherwise my credit score (or credit history?) is bad or non existent.
    I never owned one, but I pay my phone bills, my rent, and other services directly from my bank account. So I wonder if these things do influence my credit score.
    If they don't, how many months of use of a credit card is necessary? And which credit card would you recommend me?
    Thanks!

    Do remember you score means nothing absolutely nothing to lender, your history is whats important.
  • thinfatwhitedukethinfatwhiteduke Forumite
    56 posts
    Third Anniversary 10 Posts Name Dropper Combo Breaker
    DCFC79 said:
    Hi, I just wanted to ask if it's true that in order to apply for a loan I need to start using a credit card, otherwise my credit score (or credit history?) is bad or non existent.
    I never owned one, but I pay my phone bills, my rent, and other services directly from my bank account. So I wonder if these things do influence my credit score.
    If they don't, how many months of use of a credit card is necessary? And which credit card would you recommend me?
    Thanks!

    Do remember you score means nothing absolutely nothing to lender, your history is whats important.
    Ok. And do you think that in my situation I would need a credit card for that? Or my phone bills, and other services I've been paying on a monthly basis (for years) directly from my bank account, are already enough?
  • zx81zx81 Forumite
    27.7K posts
    Tenth Anniversary 10,000 Posts Photogenic Name Dropper
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    None of those, apart from perhaps a mobile contract, will appear on your credit files.

    You need to demonstrate credit usage.
  • LifesAGambleLifesAGamble Forumite
    44 posts
    10 Posts
    Rather than build a credit score, build your savings.  Then apart from a mortgage, never take out a loan or any other borrowing (All borrowing does is rob disposable income from your future at a high extra cost)

    That way you will literally be £1000s and £1000s better off and be able to afford a much better lifestyle than someone who has identical income but constantly takes out loans, overdrafts and credit cards!!
    Life's a gamble, be lucky!
  • zx81zx81 Forumite
    27.7K posts
    Tenth Anniversary 10,000 Posts Photogenic Name Dropper
    ✭✭✭✭✭
    Rather than build a credit score, build your savings.  Then apart from a mortgage, never take out a loan or any other borrowing (All borrowing does is rob disposable income from your future at a high extra cost)

    That's only if you choose to pay interest. 

    Using credit to make yourself richer, both in the short and long term, is sensible. 
  • Jami74Jami74 Forumite
    450 posts
    Part of the Furniture 100 Posts Photogenic Name Dropper
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    Hi, I just wanted to ask if it's true that in order to apply for a loan I need to start using a credit card, otherwise my credit score (or credit history?) is bad or non existent.
    If you want a loan, try your own bank first. If not successful, then try for a credit card. I didn't get my first credit card until my forties. Before that I had a loan from my bank and had taken advantage of buy-now-pay-later deals from Argos and DFS (paid off in equal installments and no interest paid). I've never had a mortgage, although have always passed credit checks for renting. When I first did the eligibility checker I wasn't eligible for much, I took a chance with Sainsburys as we shopped there even though it only said 60% and got it. A couple of years later I have three credit cards (have never paid interest) and seem to be eligible for nearly everything. I've also applied for loans and credit cards within a few days of each other and been accepted for both.
    Mature student 2011-2016[
    Professional :D
    Debt Free: 01/01/2020
    Save £9.6k in 2020 - #30 £107.07/£9,600
  • edited 15 March at 11:20AM
    thinfatwhitedukethinfatwhiteduke Forumite
    56 posts
    Third Anniversary 10 Posts Name Dropper Combo Breaker
    edited 15 March at 11:20AM
    Without any form of credit history, lenders will be much more likely to reject you for any loan applications so it makes sense to start building your history up now before you actually need to get a loan. Any form of credit will do, although credit cards are usually the easiest and cheapest way to do this. Some utility providers report to the CRAs, but not all do. Rent generally isn't reported. Also, an obligatory note to make sure you ignore your credit "score" and instead focus on the actual contents of your credit report (the account info and payment history sections) since lenders do not see the numbers provided by the CRAs.

    Avoid any "credit (re)building" services - these typically charge you for doing something you can actually do yourself quite easily. The easiest thing to do is get a sub-prime credit card, and make a few purchases each month that you'd normally put on your debit card (grocercies, fuel, etc). Pay it off IN FULL every month. After 6-12 months of doing this lenders should start to increase limits and you should start to become eligible for better offers. See below for some good providers to start with - just keep in mind that you should do an eligibility check before you apply for anything, preferably from the actual providers website (rather than through a comparison site such as MSE): https://www.moneysavingexpert.com/credit-cards/bad-credit-credit-cards/


    Which one would you suggest me to get?
    From my bad understanding it would make sense to get one with the lowest REP APR.
    Also, how does it work with credit cards. You use it to purchase something and then you pay back the next month? How do you pay back? Does the card get the money automatically from your bank account or you have to pay manually each time?
    And if you don't pay back the next month you start paying very high interests?
    Are they free or you have to pay?

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