Meet the invisibles

That’s what credit agencies call the 5.8m people like Sandra — who has never been in debt but was refused a mobile contract

NURSE Sandra Pickles had always paid her bills on time and never experienced money problems. So when ‘DECLINED’ flashed up on a computer screen at a mobile phone shop after she tried to take out an iPhone contract, she was humiliated.

It turned out she had failed the phone company’s checks because she had no credit history of her own.

She had been married for 28 years and her husband had run the couple’s finances, with all the bills in his name.

The mother of two didn’t even have her own bank account. Her salary from her part-time job as a nurse went into an account in her husband’s name.

So when their marriage ended and she tried to take out a £36-a-month mobile phone contract in her own name, she was refused.

Sandra, 57, says: ‘I felt so ashamed. I was standing there with my son and there were all these people in the queue behind. The cashier didn’t say anything. I think she was embarrassed as well.’

In fact, Sandra, from Cheshire, is one of an estimated 5.8 million ‘invisible’ Britons at risk of being refused a credit card, mortgage or phone contract because they have no history of managing money, according to the credit reference agency Experian.

Many are women like Sandra who find themselves dealing with finances for the first time when they are divorced or widowed.

Older people who have paid off their mortgages and not opened any new accounts for years can also have a very limited credit history, as can young people living in rented accommodation and professionals who move to Britain from overseas, because credit scores are based on UK financial history.

Customers are officially known as ‘thin-file’ if they have fewer than three open accounts, including current accounts, mortgages, credit cards, phone contracts, car finance and energy accounts — or ‘no-file’ if they have none.

James Jones, of Experian, explains: ‘ Lenders like to see a positive payment record because they use this to predict your future behaviour.

‘People with no track record give lenders nothing to base a decision on, so they are unlikely to qualify for many products, certainly at competitive rates.

‘Being “invisible” can leave you with a similar credit score to someone who is in significant arrears or has defaulted on some lines of credit.’

Credit scores are typically calculated from a starting point around the UK average. This is roughly 760 points out of a possible 999, according to Experian (other credit reference agencies have different scoring systems).

This is in the ‘fair’ zone, where you can usually get credit, but will miss out on the best deals, So you may be offered a higher rate or a lower credit limit.

Most people can improve their credit rating — even if they have missed payments — through positive actions such as paying down credit card debt.

However, if you have no credit history, your score is likely to be even lower than average because you have failed to earn positive points and may also have been penalised with negative points.

For example, if you have only one account to your name that was opened more than 18 months ago, your score can drop by 75 points, according to Experian.

This would take an average ‘thin-file’ person’s score down to 685 — putting them in the ‘poor’ zone, where it is far harder to get credit except from lenders that charge interest of up to 40 pc.

Sandra, who has two grown-up children, has helped to improve her credit score by setting up bills in her name and clearing a bank loan without missing a payment.

Other ways to build up a credit history quickly include registering on the electoral roll — which can add 50 points to your score — and opening a current account. Mr Jones also recommends taking out a monthly phone contract, switching some household bills into your name and taking out a suitable credit card.

However, it is vital that you can meet all payments each month and don’t apply for multiple accounts at once, as this can damage your score.

If you or your children rent, it is also possible to add monthly rental payments to your credit report to help build up a score.

Following her divorce, Sandra eventually managed to transfer her existing phone into her name and opened a current account to manage her money.

But when she tried to apply for a bank loan, her low credit rating meant she was only eligible for a high interest rate of 29 pc.

Two years later and in a new relationship, she says she won’t make the mistake of neglecting her credit history again.

‘ Our generation was one where married couples shared everything,’ she says.

‘My husband was the breadwinner and it didn’t seem unusual that I didn’t have anything in my name. Now, I think I was naive and we should have shared things more equally.’