How do you start with a credit card to build a rating

pixnoo

Please can someone advise. My son needed a car when at uni.  I bought one and put it on my credit card.  He pays me bit by bit every month which I then pay off the card.  It is always more than the minimum amount.  I suggested that as he has finished uni and is now in fulltime self employment he should get a credit card 0% and do a money transfer to me and take the debt on himself. He cannot get approved for a card after looking on MSE soft searches.
How is he supposed to start? How does he ever start building a credit rating so that he can  get a mortgage.  Please will someone help me to understand.  He only needs £1500!

Brie

phone contract?  register to vote (makes you look stable) & not move around a lot (more stability)

he could try to apply directly for a card with one of the credit builder places.  Vanquis, Aqua but they won't be offering any 0% deal.  In fact I would think that no one is going to offer him a deal like that from the start.

Bue21

I think it is possibly unrealistic to expect to get a 0% card without a credit good history. Both my sons have started by applying for credit builder cards (which generally have eyewatering APR rates and low credit limits!). Use it but clear balance each month so you don’t pay those charges. After a while they have a history and can apply for more attractive cards. The Uni student has just got his first card as he is now on a placement year -  didn’t have a reasonable chance of being acccepted before when we did the soft searches.

cymruchris

pixnoo said:

Please can someone advise. My son needed a car when at uni.  I bought one and put it on my credit card.  He pays me bit by bit every month which I then pay off the card.  It is always more than the minimum amount.  I suggested that as he has finished uni and is now in fulltime self employment he should get a credit card 0% and do a money transfer to me and take the debt on himself. He cannot get approved for a card after looking on MSE soft searches.
How is he supposed to start? How does he ever start building a credit rating so that he can  get a mortgage.  Please will someone help me to understand.  He only needs £1500!

If he has little or no credit history - he's unlikely to be approved for a multi-thousand limit card with a big fat 0% interest free transfer offer - these things usually come to those with a demonstratable positive history.

Is he still living with you? Or at his own property? Is he on the electoral roll? Does he have a mobile phone contract (even if sim-only) in his own name?

Usually people start with what's called a credit-builder credit card from the likes of Vanquis/Aqua/Capital One - they usually start with very low limits of a couple of hundred pounds, and usually with eye watering interest rates. The best plan would be to get one of these, then use it monthly for regular spends like grocery shopping, and then absolutely and WITHOUT fail, pay it off in full every single month. (Did I say every single month? as I mean EVERY SINGLE MONTH).

Then over the months that follow he will build up a positive credit history, and likely as time passes his credit limit will rise. So will his eligibilty for other cards from big brands where the 0% offers lie. It takes time, and sometimes it takes a lot of time, as it's about trust. Lenders want to see that someone can be trusted with a credit card before offering them better deals.

Isoei

Credit-building cards such as Vanquis etc. As the others have said, be careful with the % they have on them, and make sure to pay off the balance each month to build a positive score.

It may also be worth setting up an account with somewhere like Next or similar shop credit offers (not sure what they're called) - I got a Next account fairly young, and over time built up a credit score whenever I needed a few new bits of clothing or a piece of furniture for my room. Of course, like the credit builder cards, paying off the full balance each month will avoid the balance to pay creeping upwards. Might be useful if they're in need of specific goods or frequently use those shops/sites, but will still require careful management. As the above users say, it'll take time!

CliveOfIndia

Isoei said:

Credit-building cards such as Vanquis etc. As the others have said, be careful with the % they have on them, and make sure to pay off the balance each month to build a positive score.

Just to clarify a couple of points.

First, you don't need to worry about only using 30% or whatever of your available credit limit.  As long as you always repay the full balance every month, the percentage utilisation is irrelevant.  It's only if you carry a balance from month to month that it becomes an issue - (a) because it'll cost you a lot in interest and (b) it shows lenders that you're borrowing what you can't afford to repay.  Obviously, you must never go over your limit.

Secondly, building a positive score is a futile goal - the score is nothing but a marketing gimmick made up by the CRAs.  What is important is to build up a good solid credit history.  You need to show that you can manage credit responsibly, live within your means and always repay what you owe.  To this end, you just use the card regularly for planned, budgeted spending and always repay in full every month without fail.

elkiedee

Is the priority paying you off or building a credit score? 

If the priority is to pay you off, can he increase the payments towards the £1500 balance a bit? Give you more in good months? Does he earn the same amount each month? Then he can look at credit when that's sorted.

For credit score, I wouldn't think a money transfer or balance transfer credit card would be aimed at a recent graduate who hasn't had a credit card before.

Store cards (like Next, referred to above) have a really high APR and are quite expensive if not paid off regularly.

Has he asked his bank (current account now, student account) etc if they would offer him a credit card? If he kept to the terms of student/graduate accounts, overdrafts etc and has a reasonable history with them, they may be more helpful than banks looking at his credit file. If they will, he shouldn't use it for everything, just make a few purchases and pay it back each month, but try to keep most of his expenses on debit card/current account. Because if he's paying back student loans etc, spending on a credit card, even if he's trying to pay it all back every month, even if he's succeeding, can end up being that he's spent all his income before he receives it. Especially as he's self employed, if something goes wrong, his income drops etc.... that can get tricky. 

Nasqueron

elkiedee said:

Is the priority paying you off or building a credit score? 

If the priority is to pay you off, can he increase the payments towards the £1500 balance a bit? Give you more in good months? Does he earn the same amount each month? Then he can look at credit when that's sorted.

For credit score, I wouldn't think a money transfer or balance transfer credit card would be aimed at a recent graduate who hasn't had a credit card before.

Store cards (like Next, referred to above) have a really high APR and are quite expensive if not paid off regularly.

Has he asked his bank (current account now, student account) etc if they would offer him a credit card? If he kept to the terms of student/graduate accounts, overdrafts etc and has a reasonable history with them, they may be more helpful than banks looking at his credit file. If they will, he shouldn't use it for everything, just make a few purchases and pay it back each month, but try to keep most of his expenses on debit card/current account. Because if he's paying back student loans etc, spending on a credit card, even if he's trying to pay it all back every month, even if he's succeeding, can end up being that he's spent all his income before he receives it. Especially as he's self employed, if something goes wrong, his income drops etc.... that can get tricky. 

Nobody should worry about the fake credit score, nobody but you ever sees it