First Direct accepts customers with bad credit scores

FIRST Direct customers with troubled credit histories will be allowed to open accounts for the first time to help them improve their scores in the future.

Phone and internet banking is planning a revamp to become “more accessible to a wider population” and compete with new digital rivals such as Monzo.

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First Direct, owned by HSBC, will ease its credit requirements as part of a 12-month overhaulCredit: Getty – Contributor

Joe Gordon, the bank’s 34-year-old chief executive, told the Financial Times the bank, owned by HSBC, wants to expand its offer.

Mr Gordon says he will bring a number of new features over the next year, including an AI (artificial intelligence) “financial autopilot” capable of making personalized recommendations and an integrated market.

We asked First Direct how exactly these changes would work in practice and how they would help customers improve their credit history, but a spokesperson said exact details could not yet be released.

Currently, your credit score must reach a certain level before First Direct will accept you as a customer.

How to improve your credit score

YOUR first stop should be to make sure you are registered to vote at your current address. Lenders use the voters list to verify that you live at the address provided when you apply for credit.

Living with or being married to someone with bad credit will not affect yours.

However, having a common financial product — such as a joint checking account — can tie you to another person’s credit history. If you have ever had a joint financial product with someone you no longer have a relationship with, notify the credit reference agencies so they can sever any association between you.

You can apply for special credit cards if you have little or no borrowing history or have had credit problems in the past. These usually charge very high interest rates, so be sure to set up a direct debit to pay off the balance in full each month.

Finally, try to limit the use of your credit. This is the percentage you use of your credit limit: for example, using £1000 on an account with a limit of £2000 will give you 50% use. Experian recommends keeping it below 25%.

You should also check your credit report to ensure that all the information the agencies hold about you is correct and to correct any errors.

It is now free to consult your credit file with the three main credit agencies: Experian, Equifax and Trans Union.

It’s worth checking out all three as they each collect slightly different data from different vendors such as utility companies.

It doesn’t say what that threshold is, but said it sometimes uses scores calculated by a credit reference agency, and that credit scoring doesn’t designate specific information as the reason for denying an application.

Mr Gordon told the FT: ‘First Direct was never set up for a specific demographic, it was for people who wanted to do things differently.

“Maybe the approach to credit scoring over time meant that some people thought they couldn’t be a part of it.”

If successful, features may also be introduced in HSBC.

App-focused challenger banks, such as Monzo and Revolut, have added millions of customers in recent years, prompting big banks to modernize their brands.

Last month, First Direct scrapped its £10-a-month fee on its flagship 1st Account checking account.

It also offers new customers £50 to switch current accounts if they deposit £1,000 within three months of opening the account.

The bank topped consumer site MoneySavingExpert’s banking customer service survey in August. He has only missed the crown once since 2010.

First Direct is one of 17 banks that have signed up to a voluntary code to help tackle bank transfer fraud – but people still get bitten.

Meanwhile, celebrities including Katie Price were slammed last week for promoting the boss of a company that offers solutions such as Individual Voluntary Arrangements (IVAs) to people struggling with debt.

And it recently emerged that the number of households in debt to energy companies exceeded 2 million.

Martin Lewis reveals how to cut debt with new HSBC card that gives you 0% interest for 32 months

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