Why Applying for Credit Can Do More Damage Than Good….Even if You Have No Debt

Apr 25 2012

Understanding what a credit report really is and what kind of information it holds on your financial past is very important before applying or even considering applying for a loan of any kind. People are often caught out by thinking that because they have never taken any credit or had any previous debt that getting a loan will be an easy task simply because they do not have a bad credit history. However, having no credit history is sometimes harder to overcome than having a poor credit history.

Every time you apply for credit, whether it be a bank loan, business grant or even a mobile phone contract, information is sought from your credit report to check how reliable your re-payment history is; but not only this, at the time when you apply for credit, information is also entered to your credit file, and if your application is denied, this is reflected negatively in your credit file, even though the reason you have been declined is simply the fact that you have no credit history.

So, how do you build a credit history when no one will give you any credit in order to build one? This is a very common and frustrating problem that is often presented to first-time buyers looking for a mortgage, or looking to go into business for themselves.  With this article, we hope to be able to answer the questions you have, and clear up some misconceptions so that you can make the right decision and ensure that your credit report remains attractive to your bank manager:

• get your report – By doing a simple online search for check my credit report you will find a good selection of registered credit agencies where you can order a copy of your credit report; you can choose you download or have it sent to you via post for a small fee. Everyone is legally entitled to obtain this report, and it is definitely worth having so that you can stay more in control of what information companies have on you, and keep your credit report in good shape.

• start small – We have already established that it’s difficult to get credit even when you’ve never had any, however, that doesn’t mean it’s impossible – there are always ways around this; it’s just knowing where to start that can be tricky. If you are over 18 and are in steady employment with a regular income, then it shouldn’t take too long for you to be able to build a good credit rating; speak to your bank and find out what the best current account would be for someone looking to build a credit history – you will not be the first or the last person in this situation and they will be able to advise you on the best ones. Most current accounts come with an overdraft facility and depending on how much you earn you will be eligible to apply for this; as long as you keep within your limit and repay on time, you will build a good credit history very quickly, and the more reliable you become, the more desirable you are to lenders.

Governments are now also taking notice of the problem and recently announced a new scheme to be put in place that rewards renters who consistently pay their rent on time to receive a positive entry on their credit reports; which is great news if you’re hoping to apply for mortgage but don’t want to take out credit cards or overdrafts to build a credit history.