Practical Steps to Improve Your Credit Rating – Part 1
Wongawoman asked:
Young people coming of age don’t often realise that their credit rating is something that will stick with them for the rest of their lives. It all happens pretty fast too, once you head to university or finish school and start working. There are school loans, your first bank account, credit card offers and maybe even a car loan. While this is a very exciting time and there is a lot of change happening all at once, this is the time to be aware of credit, how it all works and what you can do to maintain and improve your credit rating.
First, having no credit at all is in some ways just as bad as having bad credit. Creditors assess creditworthiness in part by how you have handled previous lines of credit. If a lender can establish that you’ve repaid previous loans or debts on time, then they take that as evidence that you are lower-risk and therefore worthy of them to take a chance on.
1) Open a current account and use it responsibly
One of the catalysts for the current state of the economy was people living beyond their means. Understand your means by creating a budget; even if your incomings and outgoings are meagre, this is still a good habit to start while young. Next, set up bill payments to come directly out of your current account by direct debit. If this is only a small monthly mobile bill, it’s a good start.
These are the baby steps to establishing yourself as a creditworthy individual. In time you will be able to apply for an overdraft facility from your bank. Even if you don’t use it, which is ideal, it’s still a positive step for two reasons. First, most banks register details with credit reference agencies of customers who have overdraft facilities on their current accounts. Now you are on the radar! Second, your overdraft facility can give you a bit of peace-of-mind knowing that if you ever go overdrawn, even by a few pence, you will be covered. However, always manage your finances without your overdraft facility in mind.
2) Register on the electoral role
Being registered as a resident at your current address takes very little effort and returns huge benefits. Any lender with whom you apply for credit will check your address history as the first steps in any application process. Being able to verify that you are who you say you are and you live where you say you live will save yourself many a headache in the long run.
It may be difficult during the student years, however establishing a stable history of residency can also benefit you. Moving a lot, much like changing jobs frequently, can sometimes lead creditors to believe that your lifestyle is unstable and therefore too high-risk.
To register on the electoral role, you can either contact your local council or visit the Electoral Commission’s website. Even if you are ineligible to vote in the UK, you still need to let the Electoral Commission know your residency status.
Take action now to implement these very important tasks. Wonga offers debt and borrowing advice on their website and also has a free budget calculator and free Guide to Borrowing. These useful tools will help you take the first steps in getting your credit history off on the right foot.
Amber
Young people coming of age don’t often realise that their credit rating is something that will stick with them for the rest of their lives. It all happens pretty fast too, once you head to university or finish school and start working. There are school loans, your first bank account, credit card offers and maybe even a car loan. While this is a very exciting time and there is a lot of change happening all at once, this is the time to be aware of credit, how it all works and what you can do to maintain and improve your credit rating.
First, having no credit at all is in some ways just as bad as having bad credit. Creditors assess creditworthiness in part by how you have handled previous lines of credit. If a lender can establish that you’ve repaid previous loans or debts on time, then they take that as evidence that you are lower-risk and therefore worthy of them to take a chance on.
1) Open a current account and use it responsibly
One of the catalysts for the current state of the economy was people living beyond their means. Understand your means by creating a budget; even if your incomings and outgoings are meagre, this is still a good habit to start while young. Next, set up bill payments to come directly out of your current account by direct debit. If this is only a small monthly mobile bill, it’s a good start.
These are the baby steps to establishing yourself as a creditworthy individual. In time you will be able to apply for an overdraft facility from your bank. Even if you don’t use it, which is ideal, it’s still a positive step for two reasons. First, most banks register details with credit reference agencies of customers who have overdraft facilities on their current accounts. Now you are on the radar! Second, your overdraft facility can give you a bit of peace-of-mind knowing that if you ever go overdrawn, even by a few pence, you will be covered. However, always manage your finances without your overdraft facility in mind.
2) Register on the electoral role
Being registered as a resident at your current address takes very little effort and returns huge benefits. Any lender with whom you apply for credit will check your address history as the first steps in any application process. Being able to verify that you are who you say you are and you live where you say you live will save yourself many a headache in the long run.
It may be difficult during the student years, however establishing a stable history of residency can also benefit you. Moving a lot, much like changing jobs frequently, can sometimes lead creditors to believe that your lifestyle is unstable and therefore too high-risk.
To register on the electoral role, you can either contact your local council or visit the Electoral Commission’s website. Even if you are ineligible to vote in the UK, you still need to let the Electoral Commission know your residency status.
Take action now to implement these very important tasks. Wonga offers debt and borrowing advice on their website and also has a free budget calculator and free Guide to Borrowing. These useful tools will help you take the first steps in getting your credit history off on the right foot.
Amber
