First Time Credit Cards

 What if you are obtaining a Credit Card for the first time?

This article explores the difficulty in obtaining a credit card without a credit history.

Credit card companies exist to lend monies. Before they lend money to anyone they carry out what is known as a risk assessment. That is they want to know that if they are to lend money, will it be repaid i.e. whether the borrower is a good risk. To carry out this risk assessment, they will need to carry out a credit search.

To do this they contact Credit Search Companies such as Experian and Equifax who hold information on all financial transactions carried out by an individual in the UK. From this information the credit card companies will be able to ascertain whether the borrower is the type of person to meet his financial commitments. That is, does he make his payments on time. In this way they can build up a financial history. They will then do what they call a credit score. That is a risk assessment. Most credit card companies will not reveal how they credit score a borrower and while they will have different methods of credit scoring, they all have a common goal – to ascertain if the borrower is a good risk.

 But how can you be assessed as a credit risk if you've never obtained credit?

There is always a first time for everything and obtaining a credit card is no different. But if you do not have any credit history, the credit card companies will have no way of assessing your financial past.

So what can you do?

Very little is the answer. In such a situation credit card companies will grant you a card but it is likely that it will have a low credit limit and a high interest rate. However, the borrower will have the opportunity to demonstrate, over a period of time, whether he is a good credit risk. As credit confidence is built up, the credit card companies will offer a better interest rate and an increase to the credit limit.

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