Credit reports for young people, explained

Alright, I’ll level with you. Before doing some much needed research, I had no idea what ‘credit score’ and ‘credit reports’ actually meant. I knew what it existed in relation too, but I’d heard some people tell me I needed to get a credit card for the sake of it and some people saying that it’s an unnecessary expense. Suffice to say, I needed credit reports explained to me.

And if you’re reading this and thinking: “I don’t understand it either”. Don’t worry, it’s the internet. Here, no-one can judge you for knowing nothing. In fact, some people throw themselves into full-on arguments while knowing nothing. It’s a truly amazing place.

So let’s talk about building a credit history as a young person. While there are loads of great advice resources opine, I found the Money Advice Service the most helpful.

So, before accepting a loan or credit card you need to understand credit reports, credit agencies, what it means to be young and borrowing and, finally, how to maintain a good credit history.

Credit reference agencies


So who are these mysterious agencies? Well, in the UK they go by the names Experian, Equifax and Callcredit. Their job is to collect all the financial information of the public and build individual profiles. This profile is then handed to banks and building societies to be used as a criteria to decide whether to lend money to certain people.

What are credit reports used for?


So this ‘profile’ (credit report) is kind of a responsibility checker. It helps banks decide whether to lend you any money and how much interest you’ll have to pay back afterwards. For example, if you invested your entire savings at age 21 into the wax gel market and lost it all – you’d be considered a risky client to lend to.

In more realistic situations, let’s say your credit report shows a few missed repayments but nothing massive, you might have to pay back more interest because you’re a riskier client.

Being young and having direct debits


Hooray for youth. The surface logic might suggest that having a credit report that has no history but your personal data is a good thing. However, banks need an indicator for what kind of borrower you are. They need data to assess your risk. The best of showing this is by a credit report that shows well-managed borrowing.

The easiest and simplest way to start doing this is by setting up some Direct Debits. Even if it’s just paying your monthly Netflix or Spotify bills, showing that you never miss a payment is a solid in your corner.

A good credit history from day dot


Looking out for your credit history can be really important when you’re a full-grown adult for mortgages and loans etc. There are a few things you can do to keep in the credit reference agencies’ good books.

  • Only take on affordable borrowing (just don’t be an idiot, basically)
  • Don’t miss any small payments
  • Make sure you’re registered on the electoral register from age 18
  • Own up to any mistakes by getting in contact with your provider as soon as you miss a payment.