The impact of a thin credit file

Have you had an application for a credit card turned down? Bank refusing to provide an overdraft? Yet, you don't have a poor credit history or any county court judgements against you?

If you have no idea why you have not been able to take out credit, despite being able to make the repayments, you are not alone. There are many people in the UK who, despite having a dependable income and no debt, find it difficult, or even impossible, to obtain credit. One possible reason? A thin credit file.

What is a thin credit file?

It is exactly what it sounds like. We all have a credit file or report which details our loan or store card repayments along with our other credit activities. It can also include other information such as current and previous address, date of birth etc. It can contain a lot of data. But, issues arise when there is little data available about you resulting in a 'thin' or empty file.

What are the repercussions?

Lenders are very reluctant to advance credit to customers who have no history of obtaining and repaying credit or who have no proof of address. In fact, research by Big Issue Invest revealed one large bank turned down over 90% of applicants who had thin or empty credit files. The same research showed 30% of applicants who rented their accommodation had a thin credit file.

By extrapolation, with 19% of UK households living in privately rented housing, the problem of thin files can potentially affect millions of people in this country. So, if you have little or no credit history and rent your home from a private landlord, you could be caught in the middle of a perfect storm. Fortunately, these issues can be resolved without borrowing shed loads of money to build a credit history (not that you would be able to).

Putting some meat on the bones of your thin credit file

One of the basic omissions from credit files can be proof of address. Credit reference agencies will examine the electoral roll to confirm the address of every applicant for credit. If you aren't a registered voter your application will fall at the first hurdle.

This is a huge problem with over eight million Brits who are eligible to vote not being on the electoral roll. Yet it is easy to fix. You can register online here. It is a simple process and only takes a few minutes. This small step will add vital information to your file and could even make the difference between being accepted or refused for credit.

If you have little or no credit history you can bulk up you credit file by transferring regular payments you make to a credit arrangement. The most obvious example of this is switching from a pay as you go mobile phone to a monthly contract. But, if you are a tenant of a private landlord, there is another very simple way to build a positive credit history.

CreditLadder can help you improve your credit score

If you want to improve your credit position by reporting your rent payments, CreditLadder is the only way to improve your credit score and position across all four of the main Credit Reference Agencies in the UK, namely Experian, Equifax, TransUnion and Crediva. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money.

CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.

Remember the information provided in this article is for information purposes only and should not be considered as advice.