Why might DS be declined a credit card?

[bizzymizzy]

DS (20) is a final year student with a Nationwide student current account that always has at least a few hundreds pounds in it. He currently lives at home, rent free, and has a part-time job to fund socialising, savings etc. He already has a well paid graduate job lined up for next September.

He wants to start building up his credit score, to help with his plans for moving out. When he checked his credit report it was all fine, but said it could be improved by getting a credit card.

So, he filled in the application form for a Nationwide Credit Card. It asked him about his income (which meets their minimum criteria for getting a card) and asked him for his outgoings on rent, childcare, etc, which were zero. When he submitted the form it said he would be declined due to his outgoings. This seems very odd - surely zero outgoings should work in his favour?

Can anyone help us understand the logic?

He cant demonstrate budgeting would be my guess. He needs to show controlled/managed spending.

Zero outgoings wouldn't necessarily work in his favour. They want to be able to see that he can repay debt. Can he get a bill put in his name so he can verify some kind of reliability in repaying debt?

Is he on the electoral roll? I got unexpectedly declined for a card a few years ago and when I looked into it I'd dropped off the register after a house move.

He has no credit history. Zero outgoings probably confuses the computer! There’s no evidence that he would pay back credit if given it.

Tell him to pause and research before he does anything else, he doesn’t want multiple rejections on his report.

One option could be looking on money saving expert for credit cards for bad credit. He can get one, use it and pay off in full for a few months, will start to give him a credit history.

Try this. As the credit checker implied, you tend to get more credit when you already have some.
https://www.moneysavingexpert.com/eligibility/credit-cards/search/

Tell him to apply for a credit building card with a lender like Vanquis or Ocean. They’re specifically aimed at people with poor / no credit and have low credit limits, and pretty much guaranteed acceptance. If he’s diligent about spending a couple of hundred pounds or so on the card every month and then paying off the full statement balance, he’ll gradually build his credit record. Just drum into him the importance of not getting carried away and using it as “free” money, the interest rates tend to be very high.

I'd guess he doesn't have a history of paying bills regularly so they might see him as a higher risk. A regular Standing Order paid to you for rent/utilities would actually help him. What you do with that money (save it for him?) is up to you. That's all my DS had going for him when he got his first CC.

Thanks. This is what he was hoping to do, but we didn't realise he'd need a special type of card for it.

He can use an eligibility checker first to see which cards he might be accepted for.

Yes, he is. He voted in the General Election.

Does he have his own mobile phone contract? That can be a good way to build up paying a bill each month.

It could well be that having 0 outgoings looks odd to the way it’s scored so that’s why it’s rejected him? As it’s with his own bank it might be worth calling them to chat about his options?

My gran got declined for a store card once, lived in a home owned outright paid all bills on time (no DD) no finance or contracts even car insurance etc paid in full each year, she only said yes to the store card because the JL shop assistant said she'd get money off and she was buying an expensive coat. She couldn't show a lender that she was trustworthy with credit, because she didn't need it. She was outraged 😂.

He needs one of those highish interest credit builder cards, but also needs to use it and pay off so he's not accruing interest. Make sure his phone and car insurance are in his name and he's not just added onto yours. When I was at uni the broadband and electricity were in my name (we all paid) and things like that help too.

I couldn't get a credit card or any sort of credit when I turned 18 🤷🏻‍♀️ i had a full time job too and plenty of cash in the bank.

I got a car loan at 19 and my mum had to go guarantor for it. After that I cld get credit no bother. When I applied for a mortgage at 22 there were no issues either.

I'd maybe try entering a low amount for outgoings like say £30 cld be a mobile phone contract, or he cld say it's £100 a month for his rent to you. It's probably confusing the computer although like I said I cldnt get credit at all either. Make sure to go through a website that will check before applying that will tell him the likelihood of being accepted. You don't want his credit score going down as applying for various cards and being rejected.

Nationwide declined me an overdraft last month. No actual proper reason plenty of income, good credit history but the computer said no. It’s not my main bank though so I’ll survive!

I would recommend clearscore to keep an eye on his credit report and they show you offers with some indication of the possibility of pre-approval etc. It's preferable to use that as there is a soft search before the hard search so you have some indication (never 100% guaranteed) before you have the hard search.

Soft searches can't be seen by lenders but hard ones can.

I have used Clearscore for 3 credit card applications (balance transfers) and a car finance application all with no issues. The car finance was a lot cheaper than what I was quoted on the forecourt.

Just another quick thing for him to be aware of, ensuring no missed payments is standard but your credit utilisation is also important. If possible he should aim to remain under 50% utilisation, but 30% is optimal. So whatever his credit limit is (or combined in the case of having multiple cards) stay below 30% of that.

Thanks all. One option is to apply for a free overdraft for his Nationwide student account, but would I be right in thinking it wouldn't help if he didn't actually use it? (He always has plenty of money in his account, so has no need to dip into an overdraft).

Personally I would avoid an overdraft at all costs. The worst type of debt imo. So difficult to get out of if he did go into it.

Does he have a mobile phone contract?

No, we use PAYG - it's cheaper.