First credit card from bank?

Hovis_Granary

Hello all,

Having read the excellent guides on MSE and watched many videos and read many articles.. I'm more confused than ever about credit cards. 

I'm 31, never had a credit card (or wanted one) but I'm looking to buy a house in the next couple of years and despite having never having missed a rent or bill payment in 7 years and having a clean credit file, I'm still classed as "Needs work" by my bank / TransUnion and "Good" by Experian. Assuming this is because lack of credit history.

Not sure if relevant but I have a hire purchase car + monthly insurance payments that I'm paying off (low outgoing relative to income), but other than that no debts or credit on my file. I'm not into and never use my overdraft. 

At this stage, do I need to go for the (re)build credit score pre-accepted cards, or can I opt for something more flashy that will give me rewards on spending, like my bank would offer?

Do different cards affect my credit score differently or is it simply a matter of acceptance and credit limits offered? I've seen advice on other posts about applying for a card with my bank, is this considered good practise (assuming I'd be accepted)? 

On the subject of bank, I am a bog standard current account holder, they also offer a reward account (cost of £2/ month) with a special credit card - is this worth looking into in terms of upgrading my account?

Many thanks in advance for reading and advice offered. I really don't have anywhere else to turn to ask this stuff, MSE has helped a ton so far with trying to get my head around even needing a CC in the first place!

MorningcoffeeIV

You don't have a credit score - the ones you see on the CRAs are just gimmicks and not of any relevance to getting credit. Lenders assess you on your credit history.

Any card will build credit in the same way.  Start with your own bank. Plenty of time to get something 'more flashy' later on.

CliveOfIndia

As above, any credit card - when used correctly - will start to improve your credit history.  The credit-builder cards are more likely to accept someone with a thin history.  The advice you hear about approaching your own bank is based on the fact that, in the absence of any meaningful credit history, they can at least see how you've managed your finances in the past - which is better than nothing.

What is the reason you want a credit card?  If it's purely to build up some history then any card will do.  It's important to understand that they're not a sudden windfall of spending money, nor an interest-free loan (unless yo manage to secure a 0% promotional rate, which is unlikely with little history).  Used properly they can be a very useful tool, but used unwisely they can lead to a spiral of debt.

There's nothing "bad" about credit cards, just as long as you understand how they work and don't use them to spend money you don't really have.

Hovis_Granary

CliveOfIndia said:

What is the reason you want a credit card?  If it's purely to build up some history then any card will do.  It's important to understand that they're not a sudden windfall of spending money, nor an interest-free loan (unless yo manage to secure a 0% promotional rate, which is unlikely with little history).  Used properly they can be a very useful tool, but used unwisely they can lead to a spiral of debt.

There's nothing "bad" about credit cards, just as long as you understand how they work and don't use them to spend money you don't really have.

Hi, thanks for reply. I specifically want one to improve my credit score so that come 1-2 years time when I want to apply for a mortgage I have the best chance of being accepted (computer says yes). I would use it for doing normally grocery shopping, getting fuel etc and then pay off the balance in full every month. 

Brie

Agree completely with the others.

You might want to ensure that when you do get a card you sign up to a DD paying it off in full every month.  And assign one thing to it to purchase every month, like your petrol, or your groceries.  Nothing worse (well there's lots of worse things but you know...) than having the money in your bank to pay for something and forgetting to pay your credit card and being charged interest or a late/missed payment fee.

WillPS

Guessing by your post that your bank is RBS or Natwest - in which case switching to a Reward account would be very sensible (and can earn you an easy £5 in rewards each month, which is £3 net after your £2 fees). Upgrading to that account won't immediately make you eligible for a Reward Credit Card however.

That said I'd be surprised if you weren't offered something unless you don't have a lot of history with your bank. Make sure you always pay in full. Reward Credit Card is a great 'starter'.

CliveOfIndia

Hovis_Granary said:

CliveOfIndia said:

What is the reason you want a credit card?  If it's purely to build up some history then any card will do.  It's important to understand that they're not a sudden windfall of spending money, nor an interest-free loan (unless yo manage to secure a 0% promotional rate, which is unlikely with little history).  Used properly they can be a very useful tool, but used unwisely they can lead to a spiral of debt.

There's nothing "bad" about credit cards, just as long as you understand how they work and don't use them to spend money you don't really have.

Hi, thanks for reply. I specifically want one to improve my credit score so that come 1-2 years time when I want to apply for a mortgage I have the best chance of being accepted (computer says yes). I would use it for doing normally grocery shopping, getting fuel etc and then pay off the balance in full every month. 

OK, fair enough.  To reiterate what a previous poster said, ignore your score, it's not used - nor even seen - by any lender.  And in all likelihood it'll actually drop initially when/if you get a credit card.

But the important thing, and what a lender will look at, is your credit history.  They want to see a pattern of responsible credit usage, borrowing within your means and always repaying what you owe, on time, without fail.

To this end your plan is spot on.  Use a card for planned, essential spending, stuff you would be buying anyway (as you say, food, petrol etc.).  Wait for the statement to arrive each month and always repay the full statement balance before the "payment due" date, which is typically around 3 weeks or so after the statement arrives.  This means you'll pay no interest, and you'll slowly start to build up lots of nice green ticks on your credit history.

As Brie says, a Direct Debit is the safest way.  When you're accepted for a card you'll be given the option to pay by Direct Debit and you'll have the option to pay the Minimum Amount, a Fixed Amount or Full Balance each month.  Choose the Full Balance option and Robert's you mother's brother.  Obviously it's down to you to make sure sure there's enough cash in your current account to cover the DD when it's called for!

Hovis_Granary

Many thanks for all the comments, sounds like my best bet is just keeping it simple and applying through my bank, whilst being careful to make sure that the entire balance is paid off each month.

jbrassy

You might want to consider getting a card for those with bad credit history: https://www.moneysavingexpert.com/credit-cards/bad-credit-credit-cards/

If you get one of these and pay the balance off in full every month by direct debit, your credit history will improve. I was in a similar position to you a few years ago and got a Capital One card that pays 0.5% cashback (it no longer exists). However, I note that a lot of the best cards in the above article are supermarket credit cards which give you Clubcard or Nectar points. I would personally go with one of those because not only do you build your credit history, you also get free loyalty points for doing nothing. 

BikingBud

jbrassy said:

You might want to consider getting a card for those with bad credit history: https://www.moneysavingexpert.com/credit-cards/bad-credit-credit-cards/

If you get one of these and pay the balance off in full every month by direct debit, your credit history will improve. I was in a similar position to you a few years ago and got a Capital One card that pays 0.5% cashback (it no longer exists). However, I note that a lot of the best cards in the above article are supermarket credit cards which give you Clubcard or Nectar points. I would personally go with one of those because not only do you build your credit history, you also get free loyalty points for doing nothing. 

Doing nothing? - Apart from drawing you into purchasing only from their outlets and providing cheap and unfettered access to your data including all your spending habits, locations, type of expenditure, amounts, etc, etc, In exchange for a few measly points, not me thanks.
  

CliveOfIndia

BikingBud said:

jbrassy said:

You might want to consider getting a card for those with bad credit history: https://www.moneysavingexpert.com/credit-cards/bad-credit-credit-cards/

If you get one of these and pay the balance off in full every month by direct debit, your credit history will improve. I was in a similar position to you a few years ago and got a Capital One card that pays 0.5% cashback (it no longer exists). However, I note that a lot of the best cards in the above article are supermarket credit cards which give you Clubcard or Nectar points. I would personally go with one of those because not only do you build your credit history, you also get free loyalty points for doing nothing. 

Doing nothing? - Apart from drawing you into purchasing only from their outlets and providing cheap and unfettered access to your data including all your spending habits, locations, type of expenditure, amounts, etc, etc, In exchange for a few measly points, not me thanks.
  

Of course the types of data you refer to are very valuable to a supermarket - why else do you think they offer points in the first place, and encourage you to sign up to the loyalty program by offering discounted prices?  But the worst that'll happen is that you get more advertising - if you suddenly start buying pet food, they'll send you leaflets about their pet insurance products, that kind of thing.

If you shop at Tesco anyway, why not get a few Clubcard points on the money you would be spending anyway.  Or if you normally shop at Sainsbury, you may as well grab a few Nectar points for nowt.

It's not like they'll do anything nefarious with your data, it's just so they can give you more targetted marketing junk.

Of course, there are many cards that give actual cashback rather than points, though arguably someone with a thin credit history may find it hard to be accepted for one of these straight away.

I do take your point, but for me personally I see no harm in loyalty programs.  Any unwanted emails get binned straight away, and snail-mail advertising goes straight in the recycling bin.