How to build up your credit rating

Building up a good credit rating is an essential way for millennials to become more financially independent. Not only can a better credit rating help to give you access to credit cards and other simple financial products, it can give you that all important edge when it comes to getting a mortgage.

We speak to millennial advisers and other financial experts, who give their top tips on building up a good credit rating.

Keep high credit limits

David Hearne of Satis Asset Management recommends you keep high credit limits and low balances.

“This works very well if you have the discipline,” he says. “Percentage of available credit used is a significant factor in boosting a credit score that I don’t often see discussed.”

Make use of free credit rating websites

Nick Martin of Smythe and Walter suggests signing up to a free website, which will send you monthly updates on your credit score.

“Signing up to a free service that monitors your credit rating is very useful,” Martin says. “Not only will this help you to understand the various elements that contribute to your credit score, it also allows you to maintain and improve this over time. Furthermore, you will be able to monitor any changes and so should become aware of anything unexpected, which could, for example, indicate attempted identity theft.”

Websites that will help you do this include ClearScore.

Get back to basics

Understanding your own personal behaviour when it comes to money is an effective strategy according to Tom Conner of Drewberry Wealth Management.

“When I was a student I missed a couple of credit card payments and learnt the hard way how much this can damage your credit rating,” he explains. “From that day on, to avoid this happening again, I’ve always spent less than I earn so I have money in the bank and have direct debits set up so no repayments are missed.

“Also, I would never pay for a depreciating asset with credit, so buying a home or further education, as long as the salary expectation post-graduation stacks up, are more or less the only things I’d take on debt for. I’d never buy a flashy car with credit, only with cash I could afford to spare.”

Automate payments

For Fiona Sharpe of Verve Financial Planning, using technology to automatically pay your bills is a good way of demonstrating you’re reliable and can be trusted with credit.

“Set up a direct debit for all bills,” Sharpe recommends. “That way, if you are on holiday, in hospital or simply forgetful, you will never miss a payment.”

Get on the electoral roll

Sean Banks, a financial planning consultant at Premier Wealth Planning, who also runs the finance guy blog, recommends that millennials get themselves on the electoral roll. “One of the best ways to improve your credit rating is to register yourself onto the electoral roll at your current address,” he says. “Being registered enables creditors to check you are who you say you are and that the details you have provided to them are accurate. This helps creditors avoid issues such as fraud and identity theft, which in turn improves the security of their information and, subsequently, their confidence in lending to you.”


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