How do you get a credit score? 10 January 2022 at 11:28AM in Credit file & ratings 5 replies 161 views

CMartin1966

My son age 21 has been thinking about borrowing (loan) for a car, due to ULEZ restrictions.
He has been with Nat west since age 16.
Never been overdrawn, worked at same job 2 years. Never borrowed before or taken out a credit card as not needed. He has little outgoings, lives at home . He has got some savings. Never been in debt and I'm proud he is money savvy. 
However he cannot get a loan as he doesn't have a credit score???
Bank advised him to get a credit card and use it often for 6 months.
Is there a better way to be approved for a loan? TIA

Ebe_Scrooge

A credit score means nothing - it's simply a useless marketing gimmick used by the Credit Reference Agencies to lure you into buying unnecessary services.

A credit history is what counts.  Simply put, any lender is looking to see a history of borrowing within your means and always paying back what you owe.;

To begin with, a "credit-builder" card is a very good starting point.  They tend to have higher interest rates but will lend to those with little or no credit history, which the more mainstream lenders tend to avoid.  So yes, get a credit card, use it for everyday purchases, wait for the statement to arrive each month and pay it off in full each month before the "payment due" date.  Doing this over the course of many months will begin to build up a solid credit history, and make more mainstream cards or loans more accessible.  And, as long as you repay the full balance each month, there's no interest to pay, so the relatively high APR needn't be a concern.

As a slight aside - if he's got a steady income, some savings and very few outgoings, he'd do much better to save up for a few months and buy a decent used car outright.  He's unlikely to get a loan (well, at any reasonable rate) with no credit history anyway, so he may as well save up in the meantime.  It shouldn't take too long to save enough to buy a decent used car.  Always bear in mind, a car is a depreciating asset.  If you borrow, say £6000 to buy a car over 3 years, it'll be worth substantially less than that after 1 year, even less by the end of the 3 years when it's finally paid for.  Sure, plenty of people do take out loans to buy a car, but if your son is in a position to be able to save up and buy outright, it'll pay big dividends overall.

MaryNB

CMartin1966 said:

My son age 21 has been thinking about borrowing (loan) for a car, due to ULEZ restrictions.
He has been with Nat west since age 16.
Never been overdrawn, worked at same job 2 years. Never borrowed before or taken out a credit card as not needed. He has little outgoings, lives at home . He has got some savings. Never been in debt and I'm proud he is money savvy. 
However he cannot get a loan as he doesn't have a credit score???
Bank advised him to get a credit card and use it often for 6 months.
Is there a better way to be approved for a loan? TIA

Is he on the electoral register? That has a big impact on credit applications as well. 

Tell him to keep an eye on his three credit reports (reports, not score). The credit score the lender is referring to is their own internal score, not the score he sees on his credit reports. A lender can look any or all three or his reports. Never pay for access, free access is available as follows:
Experian - use MSE credit club
Equifax - use clearscore
Transunion - use credit karma

Having a credit card is a positive thing if managed appropriately. It's a responsible use of credit (better than an overdraft) and makes it far easier to hire cars (although at 21 he wont be able to in the UK yet). Credit cards provide protection for large purchases (>£100) that debit cards don't. 

Alex9384

CMartin1966 said:

Is there a better way to be approved for a loan? TIA

Credit card is the best way to get a credit history because if you pay it off every month in full, it costs you nothing. You only pay for what you spent. Nothing more (unlike loans).

Alex9384

He can even buy a car on a credit card, just like I did a couple months ago.

Alex9384

Being financially savvy doesn't mean avoiding credit cards (that's rather the opposite of being financially savvy). It means being able to take advantage of various credit card offers. Travel credit cards, reward credit cards, cashback credit cards, 0% purchase credit cards, etc.
I'm a foreigner and I discovered that UK is one of the best countries in the world for banking... Free current accounts with incentives for switching and credit cards giving perks, at no additional cost. Credit cards are by far the best way to build your credit history.
If someone is financially savvy, it means they don't overspend, they know what they are doing with their money. They use credit card just like they would use their debit card (except ATM withdrawals). Only buy what you can afford, then pay the bill in full (preferably by direct debit) and that's it! You're building your credit history for free, possibly even earning some cashback.