Saturday, December 4

How do you apply for your first credit card



I’m a student applying for my first ever credit card in a bid to improve my credit score.

I’ve lived at multiple addresses over the past few years, but consider my parents home my permanent address, even though I’m at university for six months of the year now.

How should I fill in my application? Should I use my home address or university address, and what do I do when the application asks for my household income and rental payments?

George Nixon, This is Money, replies: Your first time applying for credit is often a peculiar catch-22.

This is because lenders tend to use your previous credit history when determining whether or not to lend you credit, and in order to get a good credit history you must demonstrate you are a creditworthy borrower.

But the sooner you do try to solve this puzzle the better, or else you run the risk of ending up like those well-publicised ‘mortgage invisibles’ who are denied home loans because they have no credit history at all.

While in an age of open banking and greater data sharing the big credit reference agencies are not quite the sole gatekeepers they may once have been, there is still plenty to be said for taking out a credit card, using it a bit, and keeping to the repayments to build your credit history.

There is the chance that if your credit history is a blank page then you may not get the first credit card you apply for or may have to settle for a credit builder card or one with a higher interest rate, but this is not a problem provided you pay it off.

This is Money previously ran through some credit cards which may be an option for beginners here.

Being at university when you apply leaves you with plenty of other questions too, particularly if you split your time between university and going home during the holidays.

Which address do you put on, do you describe yourself as renting or living with your parents, do you include your student loan in your household income?

According to credit report provider TotallyMoney, when it comes to your address you should go with the one where you have the most credit history.

While you might think you might not have a great deal if you’re applying for your first credit card, if you’ve ever registered on the electoral roll, opened a bank account, taken out a mobile phone contract or used something like Klarna, then you will have a credit history at whichever address you’ve put on those applications.

Comparison website MoneySupermarket and credit card provider American Express both also recommended using the same address you have used if you have registered onto the electoral roll.

If you’re not sure what any of those may be, then you can check your actual credit report to see where they have been registered.

This is Money previously covered how to check your credit report and what to look out for when checking your financial CV for the first time.

If that ends up being your home address, or your parent’s address, then you should describe yourself as living with your parents.

When it comes to sections on household income, or accommodation costs in the form of rent while you’re at university, some lenders will count student loans and grants towards your income, according to Totally Money.

There’s also a possibility that given the relatively small amounts you receive from student finance, compared to a salary from full-time employment, you might not be eligible for many mainstream credit cards.

Though you can do something called a soft search or use an eligibility checker to see what your chances are based on the figures you’ve supplied, which doesn’t affect your credit score.

It means you might be better off trying for a student credit card, if the provider of your student bank account offers one.

According to personal finance site Moneycomms, HSBC, NatWest, RBS and TSB currently offer credit cards specifically aimed at students, provided you bank with them.

This is Money previously covered the best student bank accounts in August around the time of A Level results day.

The cards often come with quite low credit limits, which is not surprising, and given the sizeable interest-free overdrafts you can get it’s a far better idea to use those first rather than reach for your credit card.