We all have a credit score. It is essentially an indicator of your financial health in regards to borrowing and repaying money to professional lenders. Now, many of us make the mistake of thinking that if we never take a credit card or loan out, when we apply for a large loan like a mortgage down the line, lenders will see that we are capable of living within our means and that we have never had need to rely on someone else for financial support. While living within your means does show that you are financially responsible, unfortunately, it doesn’t give professional lenders faith in you as a good candidate to borrow money. Why? Because they can’t see how you deal with money that isn’t technically your own. They have no proof that you will pay them back based on past behaviour. A credit history devoid of borrowed money can see you struggle to receive a major loan down the line in the same way that a bad credit score with unpaid debts and exceeded credit limits can. So, it’s important that you engage with borrowing responsibly in order to improve your credit score as time goes by. This will provide you with a high credit rating, which is essentially the equivalent of a good track record. But how can you achieve this? Here are a few steps that you can take to get started!
Taking Out a First Credit Agreement
The fact that lenders are reluctant to borrow money to people with no previous credit history can cause a bit of a conundrum. If nobody will borrow you money in the first place, how can you prove yourself? Here are a couple of options that you have.
Your first option is to start small. If you apply for a small loan or a credit card with a low credit limit, you are much more likely to be approved – lenders are likely to trust you and put a little risk into giving you a small amount. If you pay this loan back on time, you may be offered another larger loan. If you use your credit card responsibly, your limit may be increased.
Apply for a Guarantor Loan
A second option is guarantor loans. This is when you take out a loan in your own name, but someone with a good credit score agrees to pay the sum back if you fail too. This eliminates risk on the part of the lender you are engaging with. Just make sure that you do stick to paying your loan back responsibly. This will prevent personal tensions between you and your guarantor from developing.
By using these methods to be granted a card or loan in the first place, you can then show yourself to be reliable in terms of making payments on time, staying within your credit limits, and sticking to terms and conditions. Your credit score will rise and other lenders will become more willing to engage with you.
Register on an Electoral Roll
If you are not yet registered on an electoral roll, now is the time to do it. This makes it much more likely that you will be accepted for credit and your score will boost significantly as a direct result of registering. The process is simple and doesn’t take all too much time at all.
Keep an Eye Out for Fraudulent Activity
If your score is low despite your best efforts and despite the fact that you are following the above steps, you might want to check for fraudulent activity being carried out in your name. This could be what is causing your score to drop. Once identified, your score can be reverted and repaired, and you can take action against the individuals who have been using your identity.
As you can see, having a good credit score is necessary for anyone who intends to take out any form of credit during their life, and at the end of the day, this is the majority of us. By implementing the above steps into your routine, you can significantly boost your credit score and, given time, you will then be able to start applying for large scale loans and credit agreements! So, get started now to start seeing results as soon as possible!