A guide to building your credit score from scratch

Building your credit score from scratch is a gradual process that requires a great deal of patience and self-discipline. Maintaining a good credit score can help you get the best interest rates when you want to take out credit and make big purchases like new cars and houses. It’s time to take a look at some of the things that you do if you want to build up a good credit score from scratch.

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Get on the Electoral Roll

One of the first things you’ll need to do if you want to build your credit score from scratch is to get yourself on the Electoral Roll at your current address. This is because lenders often use the Electoral Roll so they can verify your identity and address. Once this has been verified, it can have a positive impact on your ability to take out credit.

Open a bank account

If you don’t already have a bank account, open one as soon as you can. If you have a poor credit history or even no credit history at all, you may need to open a basic bank account before you can open an account with perks like an overdraft. Managing your bank account responsibly sends out strong signals of financial responsibility.

Apply for a credit builder card

There are lots of credit cards on the market that are designed to help you build your credit score. Although these cards often come with high interest rates and low credit limits, they can help you improve your score, so you can get more favourable terms further down the line. You may also be able to get a credit builder loan to improve your score and ability to borrow.

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Make payments on time

If you want to build your credit score, you must pay all your bills on time. Late or missed payments can have a very bad impact on your credit score and stay on your credit report for six years. Create a history of timely payments in order to get lenders on board in future.

Don’t max out

Keep your use of available credit low rather than maxing out. The less of your available credit you use, the better. Some experts say it’s best to keep your credit utilisation as low as 30%.

Don’t apply for lots of products in a short period of time

Making frequent applications for credit can bring your credit score down substantially. Only apply for credit when it’s truly necessary to do so and try to leave long gaps between applications. If lenders see that you have applied for numerous credit lines in a short period of time, this can be a sign of financial instability.

Check your credit report for errors

If you think your credit score is unfairly low, check your credit report to see if there are any mistakes on it. This can also help you detect fraud. Ask for a credit report from each of the three major credit reference bureaus in the UK. If you do spot an error, get in touch with the lender or bureau in question to get it removed.

Stay patient

Building a good credit history that will enable you to borrow large amounts takes time. This is why it’s so important to be patient and maintain good financial habits while you’re waiting for things to improve. Keep a close eye on your credit score and make sensible financial decisions to get your credit score to what you want it to be.

Why is it so important to build your credit score?

It’s important to have a good credit score for a host of reasons. A high credit score makes it easier for you to borrow when you need access to funds that you don’t already have in your accounts. It also helps when you want to make life-changing purchases. Having a low score can really hold you back when you want to get on the property ladder or need to buy a new vehicle. Here are some of the other reasons why it’s best to get your credit score as high as you can.

Get access to better loan terms

A high credit score will increase your chances of qualifying for loans with low interest rates and longer repayment periods. With a great credit score, you make lower monthly payments and keep the amount of interest you’re paying to a minimum.

Better credit card rewards

A good credit score also makes it easier for you to get approved for credit cards with perks such as rewards programmes and travel benefits. You’re also more likely to get a higher credit limit if you maintain a good credit score.

Easier approval for rental agreements

If you’re part of the rental market, your landlord or letting agent may run a credit check on you before they accept your application. A poor credit score can make it harder for you to get the tenancy you require. A higher score can reassure your potential landlord that you’ll be able to make the monthly payments on time.

Better employment opportunities

Some employers will look at your credit history when deciding whether to take you on or not. This is particularly likely to happen if you want to apply for a job with a bank or another kind of financial organisation.

Better smartphone contracts

If you’re the type of person who likes to have the best and most exciting smartphone on the market in your possession, you’ll need to build up a good credit score unless you have the money to buy one outright or to make a large deposit.

Quicker loan approval

People with high credit scores tend to get approved for loans quicker. This can be really helpful when you’re in a situation where you need money promptly.

Maintaining a good credit score can open doors to a host of opportunities and benefits. If you can consistently show responsible financial behaviour, you can improve your creditworthiness and quickly gain access to the funds you need, whether you’re in an emergency or not.

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