Am I being penalised for a lack of credit history?

Dear James,

I have a good credit score of 938. I basically have no credit history, as I have not taken out any loans and have always settled my bills immediately. I have never gone overdrawn. I have applied for two credit cards recently and have been refused both – even though these were cited as ' credit building' or good for those with no credit history. I understand banks prefer to have people they can charge fees to for late payments etc but this is totally unfair. I am planning my wedding and want the added protection that a credit card can give for these large purchases. Eventually I would like to buy a property - how am I ever supposed to get a mortgage?

Catherine, Bristol

Dear Catherine,

An Experian Credit Score of 938 is good, as you say. I’m guessing you actually have some credit history information on your report otherwise I really don’t think you’d get such a decent score. Banks now share information about their customers’ overdraft facilities on credit reports, so unless you opened your bank account before around 2000 (when most banks began obtaining customer consent to share this data) your overdraft facility should appear on your credit report. If it doesn’t, I suggest you speak to your bank because they may be able to arrange for this to happen. Prospective lenders do really like to see a proven track record of repaying previous credit and if your credit history is a little thin on the ground they may favour another applicant whose credit report includes significant evidence of responsible borrowing. You don’t say whether you explored why your two card applications were turned down and, if not, it’s essential you do this. Although lenders don’t always volunteer this information up front, if you ask they should tell you the principle reason for refusing your application. This may give you some clues on what you need to work on for next time. If they confirm it was your lack of credit history, I would try discussing this with your bank because it already has a detailed overview of your financial behaviour and might therefore be more willing to give you a credit card. You should also make sure you are on the electoral roll, as lenders use this to check your name and address and not being registered can affect credit scores. Once you do get a card this will help with your wedding arrangements and, assuming you manage it well, your future plans for a new home. (November 2012)

James
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