If you have no credit history and you are looking for finance, you are probably wondering how to build your credit score fast. Credit scoring is an important part of applying for credit, as it enables lenders to assess the risk in awarding credit to new customers. However, if you have no credit history or you have bad credit, it can be difficult to persuade lenders that you pose little risk of defaulting on your borrowing.
Fortunately, there are some positive steps you can take to build a positive credit history that will improve your chances of being accepted for credit in the future.
Join the electoral register
Lenders will usually search the electoral register when a customer applies for finance to check the authenticity of the personal details that have been provided. If you’re hoping to apply for credit but your name isn’t listed on the electoral register, you’ll find it much more difficult to get credit.
Local authorities send registration forms on an annual basis, but if you want to register immediately, you can visit the website About My Vote to apply to your council online to join the electoral register.
Obtain a credit-building credit card
Owning a credit card is considered to be a positive way to maintain a healthy credit score, but if you have no credit history it can be challenging to convince lenders to issue you with an account. A credit-building credit card is an option worthy of consideration, even in the short term. These cards, which offer low credit limits to prevent excessive or untamed spending, enable a borrower to have access to limited credit and to establish a record of repaying on time on a monthly basis. Regular payments will be recorded on the borrower’s credit record, providing evidence to future lenders of their reliability.
Credit-building credit cards do tend to charge higher interest rates than regular cards, but some will reduce their rates in return for regular, timely payments. In any case, once a positive credit record is established, a borrower’s options for obtaining more favourable terms increase.
Obtain a credit-building prepaid card
An alternative to the credit-building credit card, a prepaid card works slightly differently by loaning a small amount of money – typically £60 – that you agree to repay by making regular payments of approximately £5 to clear the debt. You’ll be required to sign a credit agreement when setting up the account, and if at the end of the year you have maintained your repayments within the agreed terms, your credit record will receive a boost in terms the settlement of the debt.
Interest fees are charged on your borrowing, so shop around to find the most competitive deal.
Use a guarantor
As a householder you have an automatic right to be supplied with electricity, gas and water, but the utility companies may prefer to have a pre-paid meter installed in your property if you have no measurable credit history.
An alternative is to set-up a direct debit with a guarantor named on the account. This is a person who is financially sound, often a family member, and has a good credit rating, who agrees to cover any unpaid bills in the event that you are unable to meet them yourself. This option enables customers with little credit history to have a direct debit set up that, if paid on time, will result in the establishment of a positive record.
With these steps you can help to build a positive credit record, and so improving your chances of being able to borrow in the future.