Building credit history - a few questions

aru92

Hello, 

I have browsed on this forum but I can't find answers to my specific questions below! Apologies if these have been answered before. 

I am an Irish citizen who moved to UK 4 years ago and have moved around house shares a lot / only used Monzo until recently. This has left my with 0 credit history and a poor credit score, leading me to get rejected for a phone contract with Three mobile. In response to this, I've recently opened a NatWest brick and mortar savings account and taken out a Vanquis credit card (£600 credit limit). I've also set up utility direct debits to pay under my name in my new house share. This has been going on for about 5 months. My credit score hasn't improved much at all, even though I've checked my report a few times and can't see any major flaws.

One thing I think would help is to increase my credit limit. I can't seem to do this on Vanquis - but I'm considering taking out a new credit card to do this. HOWEVER I have 2 hard checks on my account (One from Virgin and one from NatWest) and apparently this is damaging my score.   

My question: Will it be better for my long term credit history to take out the additional credit card now and start using it and paying it off monthly - or just to leave it and not apply for anything new, so as to reduce the number of hard checks? 

My other question is - I have a £200 Monzo overdraft limit which I go into regularly (as I keep my spending money in pots on the Monzo app for budgeting reasons). I always pay it back within a month when I get paid. Is this good for building my credit history or bad? If necessary I can stop using the overdraft, although I do find it useful as a tool for budgeting. 

Finally - I'm on the electoral roll, have made sure my info is upto date, have taken out the credit card, etc. Can I do anything to boost along this process? I'd like to buy a house with my partner in the next 1 - 2 years and I'm worried my poor credit history will impact this. I've opened a Lifetime ISA and am transferring in £200 per month (I'll transfer the full £4000 max amount before the end of the year to maximise the cash bonus). I don't have any debt, and never have.

Thank you for your help in advance!

Aru

DullGreyGuy

First of all, in the UK we do not have fixed credit scores. You have credit history which the bank will use to apply their own decision making logic to. The "score" that credit reference agencies show you was dreamed up by their marketing department and is used by almost no one else and certainly no mainstream lenders. Its other issue is that it tends to be slower to be updated -v- the information that banks get when making lending decisions.

Only products that allow you to get into debt are reported to the CRAs and so your NatWest savings account wont be reported because savings accounts dont allow you to get overdrawn. I'd be surprised that NW did a hard credit search for a savings account too, normally, as there is no credit, they'd just do a soft ID check search to validate your identity and save you having to provide copies of passport etc. 

Each lender has their own criteria and ultimately preferences, generally its considered overdrafts are looked on more negatively than other forms of credit as they also tend to have the higher interest rates, especially compared to say a credit card that you pay off in full each month so pay no interest. If that's true, or universally true, would be speculation. I dont know how the Monzo account works but would guess it comes down to the overall balance of the account so if one pot is in credit but another is in debt by a lesser amount then overall the account is in the black and so reported as such. 

penners324

Using the overdraft is a bad move. Stop using it.

Ebe_Scrooge

The previous poster has about nailed it.  Ignore your score, it's not used, nor even seen, by any lender.  The general advice for anyone wishing to build a favourable credit history is to simply use a credit card for everyday spending, and to always, always, ALWAYS pay it it full every month when the statement arrives.  Zero interest to pay, and it shows that you can manage your debts.

aru92 said:

One thing I think would help is to increase my credit limit. I can't seem to do this on Vanquis - but I'm considering taking out a new credit card to do this. HOWEVER I have 2 hard checks on my account (One from Virgin and one from NatWest) and apparently this is damaging my score.

Credit limits as such are not the end of the world.  Yes, it looks good to lenders if other lenders are prepared to offer you a high limit, but don't get too hung up on it - despite what the CRAs will tell you.  The important thing is simply not to borrow more than you can afford to repay each month.

aru92 said:

HOWEVER I have 2 hard checks on my account (One from Virgin and one from NatWest) and apparently this is damaging my score.

Avoid too many hard checks in a short space of time - this can be interpreted as a sign that you're desperate for credit.  Try and space your applications out.

aru92 said:

My other question is - I have a £200 Monzo overdraft limit which I go into regularly (as I keep my spending money in pots on the Monzo app for budgeting reasons). I always pay it back within a month when I get paid. Is this good for building my credit history or bad?

Bad - very bad.  Regular use of an overdraft implies that you can't survive on your income.  Stop using it.

Mckenna

Also a Monzo user with an overdraft. Having looked at my credit report it would appear Monzo don't report your overdraft usage just that an overdraft with a maximum amount exists.

penners324

Use Starling if that's how you want run your account.

They include the amounts in all your pots in your overall balance when calculating interest and reporting to the CRAs, Monzo don't

jbrassy

If you are regularly going up to £200 into your overdraft, I have to question why you are using Monzo? I would consider switching to First Direct where you get a £250 interest free overdraft and you get a £175 bonus for switching:
https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/#fdswitch 

Chrysalis

This hasnt been detailed by the OP but is the credit card actually been used? If not use that instead of the overdraft and pay it off in full every month, it wont take long for you to be able to get a mobile contract then.

eDicky

Regular use of your Vanquis card without approaching your credit limit too closely, paying it off in full before the due date but not before the statement (or the CRAs will see no activity) - continue in that way and your history should improve.