Best ways for young people to build credit
Having a positive credit report can be invaluable in your early years of adulthood. A good score means access to attractive mortgage offers, credit cards with better rates and rewards, generous car finance terms and more. A poor score could leave you struggling to forge a financially secure future.
Finding safe ways to build credit as early as possible ensures you’ll have a solid history by the time you’re ready to invest in essential big-ticket items, so you can effectively support your applications to borrow funds and receive favourable offers from providers. Here are some straightforward strategies that are easy to adopt that will boost your score.
- Register on the electoral roll
Wondering why adding your details to the electoral register boosts your credit score? Knowing your permanent address helps lenders confirm your identity. It can also save you time on credit applications. You can get on the electoral roll by registering to vote or confirming yourself as an overseas voter if you live abroad.
- Check your credit report
Another quick task you can do online to assist you with building credit is checking your report. This will give you an idea of your current score and reveal any outstanding issues or errors you can correct. You can find free credit score checkers on the websites of reputable credit reference agencies (CRAs) like Experian or Equifax.
- Using credit tools responsibly
The only way to prove that you’re responsible with credit is to borrow money and pay it back according to the terms. This is best done with starter tools like a credit card builder with a low limit which encourage controlled spending. For teenagers and students, it might be more appropriate to be named as an authorised user on a parent’s card.
Before you take on any kind of credit, ensure you can pay back at least the minimum amount each month and preferably the full cost to support a strong report. Getting behind on payments will damage your score and could leave you financially vulnerable faster than you think.
- Pay bills on time
Do you have a habit of leaving things until the last minute, or even being late with making payments? To lenders, this indicates carelessness with money and will be a red flag on your report. Simply paying your monthly bills like rent and your phone contract on time each month can help improve your standing.
- Avoid unnecessary applications
Did you know that if you’re refused for a credit card, loan or other finance arrangement the applications will show up on your report? Having evidence of multiple applications but no evidence of credit suggests to lenders that you’re attempting to borrow beyond your means.
Only apply for credit you absolutely need, ensure the amount you’re requesting is affordable, and seek advice from trusted adults when filling out your applications.
