In this second part of this property series, I will be talking about the dreaded credit score that plagues us all. Building a decent score takes time and just like “lose weight quick fad diets, following Quick scheme to build your credit score, will most likely have the same results. Not a lasting one! your score may grow but may not last the test of time. Below are a few tips to help you build your credit score up and strategies to help it last. I am not an expert, however, these tips helped me greatly to build my score and helped me gain my mortgage at the age of 22.
1. Check your Credit Score
I never knew anything about credit score until I was denied a phone contract. I was completely unaware of the behind scenes that led to being accepted for loans and the likes. Once I received this rejection it prompted me to make the check. from this, I learned to work on building my score. Personally, my main issue was that I did not have any credit history in my name. As a dependant, my previous phone contracts had been done by my parents. Checking your score will help you to recognise any errors such wrong addresses, late payments and many others. You can dispute this errors should you have any with the credit bureau to make the right changes.
Build Up that Credit Score! Responsibly!
1.Stop Late Payment
It is important that you try your manage your payments responsibly. Late payments on credit cards, bills do not reflect favourably on your score. It can and most likely negatively impact your score. if possible set up a direct debit to make sure you are paying your debts on time. Late payment illustrates that you cannot manage money well, therefore lenders will not be too keen to give you money. They simply cannot trust that you will be able to pay back at the agreed time, if at all.
2. Credit Cards
I have a more detailed blog post on how to use credit cards to boost your credit score. If not used correctly it will nor help to build your score. A credit card is a loan, not an income, just because the money is there to spend does not mean you should spend it all if you cannot pay it back. If you are just starting out credit cards, try to get a low limit to begin with.
a. Store credit cards are a good start. it helps you save money at your favourites stores and the best things they give quite low (£500) credit at first. However, be aware of the high-interest rate that is attached to some of these.
b. Student Credit Cards – this is specifically for students to give them the chance to build their scores. Some come with promotions and rewards but again, these may contain lower credit limit, to begin with, which is not necessarily negative if you are just starting out but have a higher interest rate.
c. Don’t pay interest – just because your credit score comes with interest doesn’t mean that you have to pay them. The best thing to do is to pay in full your credit card or loan payments each month. paying back minimal amount will increase your overall payments and take a lot longer.
3. Bank of Mom and Dad
If you do not want to take a credit card on your own, your parents may be able to either co-sign a loan with you. This could a car loan (Finance). They could also place you as an authorised user on one of their credit cards if they hold one. This benefits both parties because the cardholders can gain cash-backs from the money that you spend and you get to build your credit score.
However, the downside to this is that if you miss a payment it can affect both scores. Sometimes being an authorised user can incur annual charges as well.
4. Electoral Register
This is something that most of us do not understand the positive impact that it makes on our credit scores. Check to make sure you are on this and if you move location be sure to inform your new local council.
5. IF YOU HAVE DEBTS PAY THEM OFF, don’t move them around
Being “in debt” is not the same as having debt. For example, I have my mortgage to pay back which is a debt, but I am not “in debt” because I am able to pay back my monthly repayments and not miss them nor I am in over my head. Nevertheless, having multiple debts whether you can or cannot pay it back does not help you or your score. Budget your money wisely and slowly but surely begin to clear your debts. There are lots of help out there if you are overwhelmed with your debts.