[stuaxo]

No, it's true in the UK.

I had this issue, and had to get a credit card and buy stuff on it for a year... basically without using credit you may not have a credit rating.

I always lose my cards and have to get them replaced, so have been back on just a debit card for a few years now.

[j_mo]

That's odd, I got a mortgage approved at 19yrs old, in the UK, with no credit usage/history whatsoever. I had a credit card but I'd held it for about 3 months at the time, and have never used it to this day.

Only since then have I actually had anything on my credit report (monthly broadband payment, phone contract, monthly car insurance payment because I didn't want to keep paying the whole 3k up front every year after moving out, etc) and despite that the score has remained unchanged.

[cjrp]

What was the loan to value though?

[j_mo]

100%

[cjrp]

Wait.. they loaned 100% of the property value to someone with not much of a credit history?

[j_mo]

Yes, a few banks now offer 95-100% LTV mortgages for first time buyers.

In our case, the bank required a savings account containing a 10% deposit in the name of a family member, which is returned to them with interest after 3 years (unless you fall into arrears). ~50% of that money was our own savings and the rest was from parents savings, which allowed us to get on the property ladder with ~1yr less saving and no cost to our families after the 3yr period.

[chanc3e]

Can second this.

I had to get a credit card as mortgage got denied because my credit record didn't exist. Three months after the card, I got approved.

This is despite me earning an extravagant wage relative to my age for over a decade and never missing rent/utilities/council tax.

Bad system.

[b112]

I think this is being misstated by GP.

It isn't that a lack of credit card hurts your credit rating, but that a lack of any credit hurts your credit rating in Canada or the US.

There are other ways to get an initial credit rating than a credit card, although I agree that this is the path most easy, and chosen by many to get that first rating.

The method I employed, was to buy a car and had a parent cosign. I made all the payments, and this was enough to kick start, and give me at good credit rating.

[mattowen_uk]

Ah but, for most people it's easier to get a low-limit credit card in the UK, than it is to get any other unsecured loan.

I also didn't say 'you need a credit card to get a good credit score', I said not having one will negatively impact your score. This is 100% correct; Your credit score is made up of various metrics on how you manage debt, one of which is credit cards. You will get a % boost if you have a card that you manage well, whereas without a credit card, you will get no boost at all in that category. Granted, you may make up for it overall in other categories, but in the main, for most people, my statement still stands. Credit scores start at 0, and only improve if you show you can manage debt across multiple products.

[b112]

Hmm. I think the issue here is, we are all in different regions. Not only does the country matter (Canada here), bit the region too (Quebec, Napoleonic civil code, and provincial laws).

Credit bureaus are definitely legislatively controlled here, and court decisions have an effect on them too.

[scaryclam]

You can use direct debits instead of loans and are available for a really wide variety of payments, so is easier and safer than getting a credit card for many people.

[scaryclam]

Not only this, but getting a credit card and not using it can cause an issue for your credit, so it's better to setup direct debits and other forms of credit than it is to get a card you never use.

[BenjiWiebe]

Citation needed. In the US anyways, a low utilization rate is actually a (minor) good thing for your score.

[scaryclam]

Considering the article is about the UK, I'm not sure how relevent US utilisation is in relation to it.

That aside, I didn't say low utilisation, I said no utilisation. This has a good chance of your card being cancelled by the card issuer, which has a negative effect on your credit.

Bottom line is, unless you plan to use the card, there are better methods of increasing your credit score, so it's not a good idea to get one.

[scaryclam]

The issue isn't not having a credit card, it's never having used any credit to create a good credit history. Setting up a few direct debits should work in lieu of getting a credit card.