For someone that has never had credit before or has had credit difficulties in the past, obtaining credit anew could prove tricky. So the thought of being able to build or rebuild their credit rating with further credit could seem like a bit of a catch 22 situation.
One of the most important factors that lenders look for when considering an individuals application for credit is their ability to manage credit responsibly. In the case of a loan this would simply mean making the required repayments on time. With a credit card this means using the credit card and once again making the required repayments on time in accordance with the terms of the credit agreement.
By conducting a credit search this information is readily available to a prospective lender and is used when making a decision to lend or issue credit.
Quite clearly some form of credit is required in order to be able to manage it responsibly and as aforementioned never having had credit or having had problems in the past could make this difficult.
All is not lost. There are lenders and credit card companies that will still consider an individual even if there is either no history of previous credit or an adverse credit history.
There are in fact a choice of credit cards available designed specifically for helping people rebuild their credit rating. In the UK there is a choice between the Capital One Classic Visa, the Barclaycard Initial, two offerings from Vanquis Bank and the Aqua Credit Card from SAV Credit.
As the name suggest, the Barclaycard Initial is also ideal for people who are just starting out with credit for the first time.
One potential downside to the availability of credit cards for rebuilding credit is the higher interest rates charged. The reason for this is simple. The credit card companies either have no way of knowing if you are going to manage your credit responsibly or if you may develop further credit problems and so charge a higher rate of interest as an incentive for you to repay the money and not leave a high balance outstanding.
Whats more is like most credit cards, these offer an interest free period on purchases so if you pay your balance off in full every month you will not have to pay any interest charges at all.
Through continued responsible spending and repaying you can quickly start to rebuild your credit or demonstrate to lenders your willingness to adhere to their terms and conditions.
But beware people with good credit ratings are often bombarded with further offers of credit and find themselves biting off more than they can chew so the key to maintaining a good credit rating is to always try to stay well within in your means and be responsible with your borrowing. |
