Created by: Rebecca Goodman | 10 May 2019

How to apply for credit for the first time

If you are applying for credit, be it a credit card, mortgage, overdraft or even insurance policy, the lender will check your credit history before making a decision on whether to approve the money or not. You will usually need to have a good credit history, and score, in order to be approved but if you’ve never had credit before, how do you go about applying? Here we list the steps you need to follow in order to apply for credit for the first time.

Why do you need a credit score?

Whenever you take out credit, this is registered on your credit history and builds up a score. Lots of things can be added to your history and these include, applications for credit, utility bills and insurance bills. If you miss a repayment on a loan, or are late paying it, this will also be marked on your history. The overall score is then shown to new lenders when you apply for credit and shows them how likely you are to pay back the money they’re lending on time.  

How can I start building a credit history?

There are lots of things you can do to start building up your credit history. These include:

  • Making sure you’re on the electoral roll 
    If you’re on the electoral roll this means lenders can easily check your address and this is a positive step for lenders.

  • Open a current account
    Setting up a current account and making sure you have enough money in it to cover regular payments is a good way to start your credit score. Avoid going into an interest-paying overdraft if there is one, or into an unauthorised overdraft, as this will not only cost you money, it could negatively affect your credit score.

  • Keep on top of regular payments
    Whether it’s paying your gas, home insurance, or mobile phone bill, it’s important to make sure you’re doing this on time and you’re not late with outstanding payments. Setting up a direct debit to make these regular payments is one of the easiest ways to make sure you don’t forget.

  • Set up some regular direct debit payments
    If you have a number of direct debit payments coming out of your account, such as for your energy bills, this helps to show you’re able to manage your money and can boost your credit score.  

What can I do if I’ve got a bad credit score?

If you’re credit score is less than perfect, don’t panic. There are lots of different things you can do to improve it and these include:

  • Keeping track of regular payments
    Make a note to make all regular payments on time, either by setting this date in your diary or by setting up a direct debit so you don’t forget.

  • De-link financial ties with other people
    If you have previously opened up a joint account with another person, or have taken out a loan with someone else such as a mortgage, this can affect your credit score. When the account is closed you can request what’s called a ‘notice of disassociation’ from a credit reference agency and this will stop your name being linked with the account.

  • Check your credit score
    It’s important to regularly check your credit score as doing this will quickly show you if there have been any fraudulent payments made to any of your accounts, if anyone has tried to take out credit in your name, or any past accounts which you may have taken out but no longer use. This is a good habit to get into and should help you to keep on top of your credit score.
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