No credit is good credit. Think again

Posted by Ben Tumilty in Credit Check on 4 April 2016 - Ben is a Credit Analyst at checkmyfile

Picture this scenario. You go into a mobile phone shop to get the latest release on a contract. At £30 a month, it is well within your affordability, without pushing your monthly income too much. All in hand, you may think.

But you get declined, to your horror.“This has never happened before”, you say, “I’ve never had any debt”.

And therein may lie the problem; you don’t hold any credit cards or loans, you own your house as your mortgage has been paid (or you rent your house, so have no mortgage) and previous to this you used a pay-as-you-go phone.

In short, you’ve been of the mindset that if you don’t have the money to buy something, you’ve saved until you do, as opposed to paying on a credit card, or purchasing a car on finance. The result is that you do not owe any money to anyone.

You have no active credit, other than your current account. But unfortunately, many lenders will look to your active credit agreements to assess your creditworthiness and to ascertain how likely you are to meet repayments on time, based on your current and previous payment history.

They will also look for credit agreements you have held in the past 6 years, but if all you have are closed accounts then there is little or no record of your current credit activity, and thus makes it more difficult to judge your current situation.

This is not to say that every lender will decline you if you have little in the way of credit history. You may find it harder to obtain credit if this is the case, though. The average number of open accounts in the UK is 5-7. The more active accounts that you have showing a positive payment history, the better the reflection of your creditworthiness.

Active and responsible use of credit is seen in a positive light by prospective lenders, so demonstrating your ability to keep up with payments on multiple accounts would improve your credit score.

Having said this, we would not advise you to obtain credit that you neither want nor need for the sake of boosting your credit score. Regardless of how many accounts you hold it is essential that any accounts you do have are well-maintained.

It is worth bearing this in mind when you apply for credit – if you have little in the way of credit history, then a good way to improve your creditworthiness would be to register on the Electoral Roll, as this will show stability. But even individuals with excellent credit may be declined credit – there are no guarantees that anyone will be accepted for credit!

Applying for Credit? Check Your Multi-Agency Credit Report

30 Day Free Trial

Can I Rent With Bad Credit?

The outcome of the credit checks carried out by landlords or letting agents is a pivotal moment in the application process when you go to rent a property, but the actual information they will be looking at is probably a lot less daunting than you might expect.

Published on 14 Aug 2018 by Jamie Mackenzie Smith

Full Article

What’s Worse - Bad Credit History or No Credit History?

Whenever an application for credit is made, a prospective lender is basically looking to ensure (as much as they can) that any money they loan is going to be repaid on time. A key component in their final decision is the applicant's previous history of borrowing and making payments on time. But how does a typical lender view a consumer with little or no credit history, compared to someone with negative information recorded against them?

Published on 21 Jun 2018 by Tom Magor

Full Article

What Landlords, Employers and Lenders See on Your Credit Report

Your credit report is likely to be viewed many times during your life - often at key moments. While you might expect this when you’re about to apply for a mortgage or a car loan, it may also be checked by a prospective landlord or employer, and just like lenders, there are some key pieces of information they’re looking for that can make or break your job application or property rental.

Published on 29 Jan 2018 by Sam Griffin

Full Article

How lenders can change your interest rate even after an account has been opened

Most people are aware that your credit report and rating have a heavy bearing on whether a lender accepts or declines an application, and the rate of interest that comes with the account. However, not everyone knows that credit scoring – in the form of a particular lenders’ appetite for ‘risk’ - can continue to have an impact on your account even after it has been opened.

Published on 24 Jan 2018 by Kiah Phillips

Full Article

6 Things Lenders Don’t Want to See on Your Credit File

We live in a time where credit ratings have an ever-increasing impact on our lives. Mortgages, loans, car finance, phone contracts… almost anything that involves a degree of borrowing is likely to involve your credit report, or rather, the information it contains. A lot of information goes under the microscope during an application and unless you know exactly what you’re looking at, you may not realise which elements could be hurting your rating the most.

Published on 5 Jan 2018 by Beth Jennings

Full Article

How to go all 007 and get yourself an Aston Martin

Spectre, the 24th Bond film, is released in November and is sure to feature a string of vehicles that will have cinema goers gazing longingly.

Published on 17 Sep 2015 by Richard Catlin

Full Article

When information on your credit report is wrong

One of the main benefits of keeping track of your credit file is that you are able to monitor how your accounts are being reported to future lenders. Whether the account information is correct or not, lenders are increasingly relying solely on computers to interpret your credit file and when there is incorrect information, consumers face the potential of being declined for everyone’s least favourite reason – computer says ‘no’.

Published on 17 Nov 2014 by George Coburn

Full Article

Child Maintenance to be reported on credit report

New Government plans will see those parents who default on child maintenance payments being reported to the credit agencies. This in turn could lead to non-payers being refused for credit such as mortgages, credit cards or even bank accounts.

Published on 10 Nov 2014 by Neil Greenhill

Full Article

The real financial impact of a low credit rating

An average middle income family with a poor credit rating could be paying up to £1,225 a year more on financial products than a family with an excellent credit history, a recent has found.

Published on 4 Mar 2014 by Michael Bolt

Full Article

Landlords to be registered on central database

Every private landlord in England will be required to register on an official Government database in an effort to offer tenants better protection.

Published on 18 May 2009 by Richard Catlin

Full Article
keyboard_arrow_left

keyboard_arrow_right

We have loads of great customer reviews