Credit cards

Zedd7

Hello everyone,

im 19 years old I just wanted to get more information if I should get a credit card as I do hopefully want to buy a house in the nearby future and stuff I did check my credit score and it’s on 646 and it’s in the poor band if you recommend I should open one can u give me more information thanks. 

Ebe_Scrooge

First off, ignore your credit score - it's not a factor in lending decisions, and is not even seen by a lender.  What matters is the contents of your credit history.

A potential lender is looking to see a history of responsible borrowing and repayment - so, borrowing within your means, and always paying back what you owe, and on time.  If you have lots of late/missed payments on your history, this is a warning flag to most lenders.

However, having very little or no history is also a problem - a lender has no historical data on which to form an opinion about you.  Obviously, everyone has to start somewhere though.

So the usual advice is to get a "credit builder" card (https://www.moneysavingexpert.com/eligibility/credit-cards/search/).  These lenders tend to take on people with little history, and charge a higher interest rate for the privilege.

The "correct" way to use a card is to use it for everyday spending, stuff you'd have to buy anyway (food, petrol, whatever).  Each month you'll get a statement, which tells you when it has to be paid by (usually 3 weeks after the statement is produced).  You absolutely MUST pay the statement IN FULL, and before the "payment due" date.  If you do this, you'll be charged zero interest (so the higher APR of a credit-builder card is irrelevant), and you'll start adding positive ticks to your credit history.

Never look upon it as "free money" - only spend on the card what you know you can afford to repay at the end of the month.  Setting up a Direct Debit to pay the full amount is the simplest way - then you'll never risk forgetting to pay it.  If you do decide to set up a DD, check your first statement carefully when it arrives.  If the DD is in place, the statement will say "£xx will be collected by Direct Debit on <date>".  If you don't see this, you'll need to pay the statement manually (via online or phone banking or whatever).  If you set up a DD when you apply for the card, it should be in place for the first statement, but it can take a few days to filter through the systems, so just make sure you check.

When you set up a DD, you'll be given the option of paying the Minimum Amount, a Fixed Amount, or the Full Statement Balance every month - make sure you select the Full Statement Balance.  Paying anything less than the full amount means you'll be charged interest (on the full statement balance, not just the portion that's left after you've made a payment).  You'll also lose the benefit of nice green ticks on your credit history.

Obviously, it's your responsibility to make sure there's enough money in your bank account to cover the DD when it's called for.  Used sensibly, a credit card is the simplest way to begin building a credit history, but you just need to be disciplined enough to not spend what you can't afford.  Hope this helps.

[Deleted User]

In addition to the great advice above, get a contract mobile phone and get on the electoral register - both are good for credit history showing ability to manage credit and stability. I'd imagine unless you were rich (in which case the credit history is potentially moot anyway) you won't be buying a house in the next couple of years so might as well give it time to create a good history