FIRST Direct customers with troubled credit histories will be allowed to open accounts for the first time to help them boost their scores in future.
The phone- and internet-based bank is planning a revamp to become “more accessible to a wider population” and compete with new digital rivals such as Monzo.
Joe Gordon, the bank’s 34-year-old chief executive, told the Financial Times the bank, which is owned by HSBC, is keen to expand its offering.
Mr Gordon says it will bring in a number of new features over the next year including an AI (artificial intelligence) “financial autopilot” capable of making personalised recommendations, and an in-app marketplace.
We asked First Direct how exactly these changes will work in practice and what help it will give customers to improve their credit records, but a spokesperson said exact details could not be released just yet.
Currently, your credit score has to reach a certain level before First Direct will take you on as a customer.
How to improve your credit score
YOUR first port of call should be to make sure you are registered to vote at your current address. Lenders use the electoral roll to check you live at the address given when you apply for credit.
Living with or being married to someone with a bad credit rating won’t affect yours.
However, having a joint financial product – such as a joint current account – can link you with another person’s credit history. If you have previously had a joint financial product with someone you no longer have a relationship with, notify credit reference agencies so they can break any association between you.
You can take out special ‘credit builder’ cards if you have little to no borrowing history or have had problems with credit in the past. These usually charge very high interest rates, so make sure you set up a direct debit to repay the balance in full each month.
Finally, try to keep your credit utilisation low. This is the percentage you use of your credit limit: for example, using £1,000 on an account with a £2,000 limit will give you a utilisation of 50 per cent. Experian recommends keeping it under 25 per cent.
You should also check your credit report to make sure all the information agencies hold on you is correct, and correct any mistakes.
It’s worth checking all three as they each collect slightly different data from different providers such as utility companies.
It doesn’t say what this threshold is, but did say it sometimes uses scores calculated by a credit reference agency, and that credit scoring doesn’t single out a specific piece of information as the reason for declining 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 some people felt they couldn’t be part of that.”
If successful, features may be introduced to HSBC too.
App-focused challenger banks, such as Monzo and Revolut, have signed up millions of customers in the past few years, spurring big banks to modernise their brands.
Last month First Direct scrapped its £10 a month fee on its flagship 1st Account current account.
It also offers first-time customers £50 to switch current account if they deposit £1,000 within three months of opening the account.
The bank topped consumer site MoneySavingExpert’s banking customer service poll in August. It has only missed out on the crown once since 2010.
First Direct is one of 17 banks that have signed up to a voluntary code to help fight bank transfer fraud – but people are still being stung.
Meanwhile, celebs including Katie Price were slammed last week for promoting the boss of a firm that flogs 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 had soared past 2million.