Credit history and repaying interest free catalogue account

whyso

I'm looking to build a credit history after returning to UK. I was unable to get a credit card, even a basic one. I was however accepted for a catalogue account, which will simply be used to have a credit account on my record until I am eligible for a credit card. 

I need advice on repaying it. I bought something very cheap, under £100, so can pay it off in full when the first statement comes in... But you get three months interest free with this account. Is it best to pay it off in full, or to use the three months interest free period and show three months of repayments rather than one?

If I pay it off in full, then the account will be reported as unused for a while, but if I pay it off in three instalments it shows three months of being able to manage debt. Paying it off in one month may also show that I have the money to cover debts instantly.

Which is better in this case? Bare in mind that it will be interest free rolling debt.

MalMonroe

Hi, I'm always wary of catalogue-type accounts. I once bought something from a company that opened an account for me that I didn't want when I ordered something online and paid in full. That account stayed on my credit report for six years, although I wrote regularly to the company to ask them to remove it as I had never requested it. 

The problem is that when you pay off anything in instalments, lenders get the impression that you cannot afford to pay debts in full, whether it's interest free or not. If it were me I'd just pay it off in full - as you say it will indicate that you have the money to cover debts. It isn't like a credit card - which as you know you should pay off in full to retain a good credit history. Rolling debt isn't good, in my opinion. Even when paid off properly, it is still debt.

It may be that you just have to wait a while until you have been back in the UK long enough for financial institutions to be confident that you're not going to build up debt and then leave. 

Of course, this is entirely my own opinion and I have been in severe debt in the past so am very wary of any buy now pay later scheme. In a few months' time you may well be able to access a reasonable basic credit card - it's just a waiting game really.

All the best.

CliveOfIndia

There's very little in it, from a credit history perspective.  What counts is that you demonstrate that you can manage credit responsibility, and repay what you owe, on time and according to the T&Cs.

Aside from that, a mobile phone contract (even if it's SIM-only) can go some way to building a credit history.  Though obviously, don't go getting one if you don't need it.

Have you looked at the credit-builder cards mentioned in the MSE article?  https://www.moneysavingexpert.com/credit-cards/bad-credit-credit-cards/

whyso

I have a mobile phone contract, I've had it since I returned just over a year ago. I also had a current account, without an overdraft. They were the only two items on my credit file. They were both reported on the credit file for just over a year, I think year and three months which I thought was long enough for a credit card, but obviously wasn't. I've also been on the electoral register for over a year. Only searches on the file were for the credit card application and then afterwards the catalogue account.

So there's no real understanding of which option is best for improving a credit file. Just make sure not to miss payments. I think with such a sparse file any option is best, so long as it's paid.