How to create/improve credit rating?

[ConfusedPixie]

DP and I are likely not going to rent privately before we can afford our own home (looking at 5+ years away!), renting rooms in house shares instead. We are both hoping to create a credit rating for ourselves so that we'll be able to get a half-decent mortgage when the time comes.

How can we do this? Neither of us have credit cards at the moment so understand that will help. Though we don't really understand them and whilst he can get a student card I can only get one with 30% APR, though not sure what that means!

What else can we do?

Your credit rating basically judges how reliable a borrower you are. You need to build up some evidence for a lender.

The best way to do this, is to each apply for a credit card, use it for your normal spending (food, petrol etc), then pay it off in full EVERY MONTH. You have to be quite disciplined and stick to your budget, but if you do this, you never pay any interest (that's what the APR is about - 30% means if you borrowed £100 for a year, it would cost you £130. I think!)

You might find at first that you can only get a card with a high rate, but you are only charged interest if you don't pay the bill in full every month, so the APR is then irrelevant. As you rating inproves, you can get a credit card which pays you cash back (ie 1% per year back for your spending). We earn about £200 a year doing this.

Thank you :) I assumed that was the case RE APR, but it's a bit daunting! Do you have to manually pay it back then? Or can it be taken directly from your account?

set up a dd to clear full balance not minimum payment each month and that will clear that the card so you don't pay interest

also a store card and pay in full, or a catalogue account that you pay in full, basically just prove you can be trusted with money

I don't buy from stores with store cards, probably a good thing for my budget But I will see what my bank can offer me with a credit card next week and then compare :)

I don't use store cards either

but if you get one, use it once and pay it off it helps your credit rating

you need to have had different lines of credit to improve your rating

Agree with cc info above - MAKE SURE YOU PAY OFF IN FULL EVERY MONTH, also:

Use a site like moneysavingexpert.com to determine the right card for you -rejected applications for credit damage your credit score further

Do not go into unauthorized overdraft

Ensure you are on electoral register at current address

Close any unused debit/credit/savings accounts as these can damage your rating as well

Before you take out mortgage etc do not apply for credit, eg if you are going for mortgage and furniture/carpets whatever on credit do mortgage first and foremost then non essentials after -the more applications for credit you have, the lower your credit score

HTH

I am good at spending only what I have so it'll just be remembering to pay it off. I'll check MSE, I'm on the forums there and know they have a CC guide, I should have thought of that before now

I've just recently closed several savings accounts (used when I was doing an 'envelope' style budgeting plan, didn't last long!).

I have a student 'credit card' that my bank gave me automatically in 2007 and have failed to close that as I keep failing the security questions, which was their error as they spelt my mother's maiden name as some bastardisation of my actual surname so nobody can access the bloody account information Is there anything I can do about that?

I'll get the electoral register done, why does that help?

Would getting a small loan help towards rating as long as I pay it back? Could probably do this for our wedding.

Explanation of electoral register helping credit rating:

forums.moneysavingexpert.com/showthread.php?t=758777&page=1

(sorry, on the wine and can't be bothered to type )

Close that student CC asap I had exactly the same thing, automatically given, didn't use, then the same bank used it as an excuse to refuse a later credit application which damaged my rating

My friend got a mortgage despite never having a credit card. Being on the electoral register will help as will being in certain jobs, FWIW, when I got divorced & took over the mortgage they didn't mind that I was only a part time supply teacher as they saw teachers as being a steady profession.

I have a credit card & haven't a clue what APR it is cos I always pay it off in full. Just a tip though, write down each time you use it cos it is easy to put more on it than you mean to. Or just use it solely for petrol say.

Oh & do pay it off in full on time cos they do like to make you pay in late payment charges!

Thanks for the link sweetbee :)

I think the credit card will be a big one for us as we won't have any major outgoings monthly, rent is cash to our landlords so won't show as easily on file and we'll never be able to afford to rent before we have enough to buy. I'm a nanny and apparently it's a nightmare getting a mortgage as a nanny as our jobs are seen as unstable so I'm trying to find as much as possible that says "I a a reliable borrower.", even though it will be my job contributing most of the deposit as DP is a student and will be for 4 more years