Very Unlikely to get approved for most credit cards despite never being in debt

[Smyths]

I’ve never been in debt, never taken out a loan and never even used my overdraft. I vote in elections and recently bought a house with a mortgage and have a monthly phone bill which I pay via direct debit (always on time)

Why do credit card eligibility checkers say I have 0% chance of being approved for most credit cards?
I’ve never even applied for a credit card before so won’t have any hard searches related to this on my file.

My income is just over £30k, no financial dependants.

Would it be best to use a credit builder card for 6 months to 1 year to build up my score? Most of them are for people who were in debt or had CCJs etc. which I’ve never had though.

Hmm that's very strange, maybe double check your credit report in case there is a mistake? Maybe talk to your own bank, they may be happier to give you one as they know you, and use that to build a credit profile? Has it been more than 6 months since your mortgage? (Although I doubt that would cause a big issue, we took out finance straight after a mortgage).

That seems strange! I’m the same as you, no debt or overdraft and actually don’t have any bills in my name (live with my parents); my income is around £20k and I recently got approved for a £4K 0% interest card.

Can you check no one has been using your identity? I’m not an expert at all so don’t know but might be worth checking?

I think that's the reason - the card companies have no record of you being able to pay off debts. Catch 22, isn't it?

Bloody annoying, but I wonder if you could build up a credit history by using a buy now pay later type deal on something? Or pay in installments for something?

I've found eligibility checkers to be inaccurate. If you haven't had missed payments or defaults, you are very likely to be able to get a credit card, unless there are mistakes on your file that make it difficult to verify your identity etc. You say you've recently bought a house - have you updated the electoral roll with your new address?

A credit builder card would be a good idea, or you could try your current account or mortgage provider, as they already see that you are a reliable payer.

It doesn't matter if you aren't the target market for a credit builder card, there are no disadvantages except that the initial credit limit is likely to be low (£2-500) but it is fine for your purposes - just spend a small amount each month and pay off in full by direct debit to build up your record and hopefully get a better card in the future, such as a cashback one.

There's loads of advantages of having a credit card, that are nothing to do with getting into debt or spending money you don't have, so well worth having, especially if you can build up to a limit of a few thousand that would allow to use for car hire deposits, holidays or other large purchases due to the extra protection a credit card offers.

Thanks everyone so far especially @BarbaraofSeville

I’ve never been in debt, never taken out a loan and never even used my overdraft...Why do credit card eligibility checkers say I have 0% chance of being approved for most credit cards?

That's exactly why! Potential lenders know nothing about whether you'll be a good or bad borrower. And they're hard nosed about it and assume you'll be bad unless you prove you're good.

I think in the first instance I'd go to my bank. As mentioned, they have more information (and can also often take directly from your current account to pay missed credit card bills) so they might be willing to offer a card.

Following on to what a PP mentioned, some of the credit reference agencies were slow updating addresses earlier this year, so check your credit reports to see that they have the new address correct.

Same thing happened to me about 7 years ago. Months later I thankfully got a credit card offer from my bank which I accepted (wouldn't have accepted otherwise) and still use it like I would use my debit card (Never buy what I can't pay off immediately from my account, pay the bill every month, sometimes deposit something before the bill if it's getting too much). My spending limit increased. Took a while to build my credit rating but now it's excellent.

I don't even bother to check except once in a while when I get a report to take a look because I don't need the rating for anything outside what I can spend, not for borrowing.

This is normal. You essentially have no credit history, which means by default that you don’t have a “good” credit score. To get a good score you need to earn it by proving you’re a responsible borrower with prompt repayments etc. If you’ve never been “in debt” they can’t see how you would manage your credit repayments, so you’re a wildcard that poses a risk to lenders. You’d be eligible for basic credit building products with high apr, but nothing decent.

Personally my credit score is essentially maxed out and I’m only 23 - it’s just from having a credit card since 18 and repaying it in full on the odd occasions that I do use it.

The OP does have a credit history for her mortgage though (unless by recently she means she bought in the last month).

Try applying for one with your existing bank.

I got my first from my own bank.

It's exactly what previous posters have said. I've done a lot of work in the credit market, and they're right - CC providers want proof that you can service your debt.
Applying for cards (if you go through the full process) leaves a mark on your file, so your best bet is to go to someone like Vanquis, get a card, use it a lot (which won't be much because the limit will be low) and - this is the crucial bit - PAY IT OFF IN FULL EVERY MONTH. Then you'll have a good track record, and will make applying for lower APR cards much easier.

The APR on those cards is eye watering, but if you pay off in full every month it's completely irrelevant because you won't incur interest.

Your own bank may be the other option - they should be able to give you an answer without you going through a full credit check (which again leaves a mark on your file).

@eurochick

The OP does have a credit history for her mortgage though (unless by recently she means she bought in the last month).

Try applying for one with your existing bank.

Hence why I said “essentially” - she has a limited history.

Credit referencing agencies don’t have up to date information (they can be 4-6 weeks behind), it also can take months of replacements before your score is positively impacted. As she’s only recently bought her house, chances are she hasn’t yet built a good credit history in the eyes of the CRA/eligibility checker with her mortgage

And outside of that, she doesn’t have a credit history. Phone bills don’t affect your score positively (if you miss payments there will be a negative impact though.)

We had issues getting a mortgage due to my total lack of credit history.
The advice from the mortgage advisor was wait a few months after the mortgage was approved and for me to get a credit builder credit card, use it every month, and pay it off every month.
I've had the card 6 months now, they gave me a £1000 credit limit, and they emailed me to offer me a higher limit last year, which I refused.
I use it online, and transfer the money from the current account to a separate account for every transaction, so when the bill comes in the money's sitting there to pay it straight away.
My credit score has improved over the last couple of months due to it.

Thanks a lot everyone.
How does repaying the credit card every month work? Do I need to send a bank transfer from my debit to my credit card every month based on how much I’ve spent on the credit card or can it be set up as a standing order or even a direct debit from my debit to credit card (where the system knows exactly how much I owe each month on the credit card) so I don’t have to manually transfer the money each month?

You can set the card up to have a DD clearing the whole balance.
I think they will encourage you to set up a DD when you set it up, but that would probably be just for the minimum as a default. Whatever you do, when you get a card, never fall into the trap of just paying the minimum - that's the pathway to spiralling debts.

Take out one of the cards aimed at people with poor credit histories, usually capped at a spending limit of £500. Use it to buy things like groceries and pay the balance off in full each statement - set up a direct debit to do so. You won’t pay any interest and you’ll build a credit history.

It seems perverse that if you’ve never had credit or needed credit, lenders will consider you a poor credit risk, but think of it like anything else in life. You can’t just claim you’re excellent at something and reap the rewards, you need to give evidence of it.

You can set up a direct debit if you know the amount you'd be using every month or something.

For me, I have my bank app and I'm usually ontop of these things so would check sometimes and if the bill is there (usually there before I get it by post or email), I just click pay and pay it all off from my bank account (It's connected and is the same bank). All done within 5 seconds.

'Click pay, click make the minimum payment or all of it or choose your own amount to pay (not less than the minimum), click the account I want to pay with, click pay now'. Job done. By end of the day or next day, my credit balance is £0.00. Rinse and repeat every month.

If by some chance I forget to check the app, I still do the same thing when the bill comes either via email (if using paperless) or post. I go on the app immediately or as soon as I'm able to and pay using the same process (always priority to pay it off and not wait, then forget before the due date is past).

I always click pay in full.

It’s your choice, you can manually bank transfer or set up a full or partial direct debit.

When I was 18 I had a £500 student credit card with my student current account. This was actually at a detriment to my credit score, as the overall credit available for me was low (it was one of the factors I should improve according to the CRA.)

The student credit card had a hard £500 limit so my bank wouldn’t increase the limit at all. When I was 20 I applied for a Barclaycard initial to purposely increase my credit score. As I managed my credit card very well, within months they moved me to their rewards card with lower apr and within 6-9 months they increased my limit. Again my score is now within the top band 3 years later, so it’s a good option to build your history (regardless of you not being the target audience)

Thanks everyone :)

I'd advise setting up a direct debit at least for the minimum payment to ensure none are ever missed. Or a fixed amount if you're confident you'll always have that much in the bank when it's taken out. (Which will still take the minimum if it's more than the fixed amount). You can pay more manually by bank transfer or by debit card through the credit card's website.

I'd apply for a credit builder card. Some lenders are wary of leaning to people who haven't used credit cards before. Use the builder card for a year and then you can apply for another card that offers a larger limit and other benefits.