Rebuilding your credit history

In an uncertain financial market, it seems more and more of us are using ‘credit builder’ credit cards as a way of rebuilding our credit scores. Research conducted by Experian has revealed that 24% of all searches for credit cards last year were specifically targeting so called “credit re-builder cards”.

Low or poor credit scores mean that you are unable to access the best financial products and services, so that mortgage or unsecured loan rate may be out of reach. Some people, especially those that have never had credit, don’t realise that by not using any credit services this also affects your credit score as you have no previous financial history and so the lenders have nothing to check.

You may feel that a credit check is unnecessary before applying, but it is always a good idea to check first as your score may be lower than you think. Plus if your application is rejected then this also impacts upon your overall credit score. The research also found that the average age of those looking for a credit builder card was 34, which is perhaps a lot older than many anticipated. Traditionally this age category has had much longer to improve their credit rating via unsecured loans, overdrafts and credit cards, but they are also now in the age bracket that is most likely to be looking for a first home.

Moreover, 33% of those looking for an unsecured loan are looking to consolidate their existing debts, according to Experian, with the average borrower looking to get a £10,000 loan over a 5 year period to clear their debts. This is another important step anyone looking to buy their own home or simply improve their credit score should give careful thought to.

There seems little point trying to rebuild your credit rating if you still have existing debts to pay off. Current best buy unsecured loan deals on a £10,000 amount over 5 years are as follows:

  • Cahoot and Sainsbury’s bank (must be an active Nectar card holder, used within the last 6 months) are currently offering the best deal based on a £10,000 loan at 2.80% per annum fixed, 2.8%APR, total repayable £10,718.40, repaying £178.64 per month for 60months.
  • Clydesdale Bank, M&S Bank and Yorkshire Bank are offering a 2.90% per annum fixed rate. Representative 2.9% APR. Total amount repayable £10744.20 at £179.07 per month for 60 months.
  • Nationwide is currently offering a 3.00% per annum fixed. Representative 3.0% APR. Total amount repayable £10770.60 at £179.51 per month for 60 months.

So whatever your financial circumstances may be, and whatever the best solution is for you it seems credit builder cards are a god tool to help you on the way to more financial options.