Having a good credit history is vital to building a great credit score. For those individuals that do not have a credit history building it from scratch can prove a challenge. However, with time and patience it is possible to build a decent score in the following ways:
Get a bank account: For those that do not have one getting a stable bank account is the first step in building your credit history. Having a bank account helps in building a credit score by:
- Having a bank account for a long time shows financial stability to lenders.
- It helps in saving money and making payments via the bank that influences your credit score.
- It helps to serve as address proof verification.
Get on the electoral roll: Being registered on the local electoral register is beneficial in the following ways:
- It serves as identity proof and makes an applicant less risky to lend credit to.
- It shows that the applicant has a permanent address that indicates stability and increases the likelihood of having debts repaid.
Building credit history
While one cannot get credit without a good credit history one cannot have the latter if they have no credit-related transactions. It is a Catch-22 situation of sorts.
Some of the ways to resolve the issue include:
Explore getting an overdraft from your bank
Having an overdraft facility allows an account holder to borrow money from a bank. As it is credit, it reflects on the credit report. Certain current accounts have this facility by default, so check with your bank. If not, speak to the bank and ask them if they could offer this facility to you. Preferably avoid using an overdraft because of the high-interest rates. It is just to add build up the credit history.
Get your name on all your utility bills
Most utility bills payments made are reported to the three credit reference agencies (CRAs) operating in the UK i.e., Equifax, Experian, and TransUnion. These include broadband service providers, among other utility companies. For someone that is just starting to build their credit history having their names on these utility bills is a convenient way to build up their credit history. Ensure that the spellings of names and addresses are accurate on all of the bills as even a minor mistake could lead to mistakes featuring in the credit report.
Use the direct debit facility for payments
If there are recurring bills every month issues in your name they should be paid by the due date and in full. The easiest way to avoid losing track of monthly payments is to set up an auto-debit facility every month. The money will automatically get deducted on the due date and this will show up like regular and timely payments in the credit history that will help to boost your credit score. The only thing to ensure is there is ample money for the payments in the account every month.
Try to get a credit builder product
Certain products help build up credit history without the need for a credit check. They do charge a monthly fee but if you can afford it, they will help to build your creditworthiness over time.