Building a credit history at a young age
Although school teaches you many topics, personal finance, money management and debt management are not often stressed.
These things are more important when you leave school. If you don’t have the right guidance, you could end up with financial problems in your 30s.
Your credit score and report are extremely important. Your financial history report will be with you throughout your adult life, although it will diminish in importance as you get older. So why not start taking control?
Checkmyfile is a multi-agency credit checker service that provides a detailed report on all UK credit reference agencies. This is a great place to start if your credit score needs to be checked right away. After the initial 30 days, you will have to pay a monthly fee (PS14.99) unless your account is terminated. Click the button below to get started.
How to start building credit when you’re 18-19
Credit rating is established when you turn 18 years old.
You will be able to get great credit if you were one of those children who had to save money and manage it throughout your childhood.
However, it is important to realize that there is no quick fix for dramatically increasing your credit score. It takes time and effort.
Credit ratings are built over time. However, you can speed up the process by taking the necessary steps to present a better image to creditors and lenders.
There are many ways to improve or boost your credit score.
Below are detailed explanations of each topic to help you understand the basics of credit scoring and how you can start building a strong credit rating as a young adult.
Register for Checkmyfile’s 30-day free trial and cancel anytime if you don’t want to pay PS14.99 per month.
How to raise your credit score
It takes time to build a good credit score. You shouldn’t expect to get the best loan or mortgage rates right away.
There are some things you can do as a young British citizen to get a headstart and be your best self.
Step 1: Register for the voting system
This means you need to ensure you are registered to vote.
The electoral record determines where you live in the country. If you conceal this information (either intentionally, by forgetfulness or laziness), you will not be able to gain the trust and respect of creditors or lenders.
Register to vote in the area you live in, and keep that information up-to-date whenever you move.
Lenders prefer applicants who have lived in the same area for a long time, preferably over a number years. This is because moving locations often signals instability which lenders may consider a risk.
Step 2: Have an income source
A good credit rating doesn’t just depend on having a job, although that is certainly a plus! It’s about repaying any money borrowed on time.
If you don’t have any money coming in, you can’t repay anything. This includes extra money that’s not being used on basic necessities like rent and food.
You should not borrow more than your monthly wage if you are unable to pay the interest.
It is important to remember that you shouldn’t borrow money if it is not possible to repay.
Step 3: Use a credit card, or another type of credit.
It is dishonest to say that no one will give me credit if I can prove I have great credit history.
If you don’t have a credit history, a credit card company won’t give you a limit of PS10,000, nor would a bank lend you PS5,000 for two years. However, there are many realistic credit options that can help you build your credit score.
An excellent place to start is a mobile phone contract. Even if you only have a sim, get a mobile phone contract that is affordable and make sure to pay by direct debit so you don’t miss a payment.
Doing so will demonstrate your ability to repay the loan on time and make you appear trustworthy. This will help you improve your credit score and allow you to qualify for better mortgages, loans and credit cards.
Another way to build credit is to spend ‘little and often’ with a card, or a credit-builder credit card if you don’t have one.
This is what we will be discussing in greater detail later on, but you can also visit our entire guide to improving credit scores with a credit card.
Step 4: Always pay on time
It’s absurd to try to improve your credit score and then ruin it by poor money management.
You must ensure that you are able to repay every cent of your credit on time and every time. Don’t allow yourself to indulge in credit just because it is available.
It is easy to overdraw, borrow, or overdraw a credit card. This is why it is important to be disciplined.
Pay your credit cards and overdrafts in full each month. You can make the minimum payment with a credit card, but you will have to pay interest. If you don’t pay enough, you may be charged interest.
Failure to pay a monthly payment will most likely result in your credit rating being affected for six years.
Step 5: Keep a detailed record about your spending habits and regularly check your credit reports.
You can use every tool you have to track your money and credit score.
You can check your balance and that of your credit card company by downloading the mobile banking app from your bank.
You can ensure that you have enough money to cover all payments by keeping track of everything.
Register for a multi-agency credit report service such as Checkmyfile to keep track your credit score, and the information that the UK’s major credit reference agencies have on you.
Click the button below to sign up. However, you will be signed up for a 30-day free trial. After that, a monthly charge of PS14.99 will apply. You can cancel at any moment.
Step 6 – Avoid financial relationships with people who have poor credit histories.
Flat-sharing or other shared housing arrangements are more popular for young people. If possible, avoid having your name attached on a bill to someone else’s. This person’s credit rating could affect your credit standing if yours is not good.
Accepting a bill in your name and paying it off in full is better than having a shared bill with someone else and being unintentionally let down by someone who has a different financial outlook.
It is possible to prevent credit-linking in the future if one person has a bill and the others pay it.
Remember, however, that if you take on a debt, it is your responsibility to make sure you pay the entire amount if anyone else fails.
This could lead to a dispute, especially if someone is trying to delay or is unable pay for a prolonged period of time. Only agree to your name being on a bill if it is absolutely necessary.
Step 7 – Profit From Your Success
Every six months, review your credit score and consider strategies to improve it.
Checkmyfile allows you to verify your credit history online. If it is good, you may be eligible for a higher credit card with additional benefits or an increased overdraft limit.
Gradual improvement is the best strategy to improve credit scores in the future.
Step 8 – Patience is necessary
Although it takes time to build credit, and improve your credit score, with some determination you can make it happen.
Don’t try to obtain more credit quickly. Too much credit may cause credit problems. If you wait for the right moment, everything will fall into place.
If you follow our advice, you’ll see an immediate improvement in your online credit score. Six months of careful management could result in a significant improvement.
How to improve your credit score by using your credit card
You can build great credit history as long as you are able to make your monthly payments on-time.
This shows lenders that you are trustworthy and will result in lower-cost loans.
You might consider a credit-building or credit card if you have low credit scores or no credit history.
Credit cards are available for young people without credit history. Make sure to shop around and do your research in order to find the best one.
To improve your credit score, you should follow these steps when using a credit-card:
- Your monthly bills should be paid on time and in full.
- Do not borrow more than you are able to repay.
- You should be aware of the risks associated with borrowing.
- Keep track of your budget.
- Keep your credit usage (utilisation) rate below 30% of your credit limit
- Further details: How to raise your credit score by using a credit card
Common Questions about Credit Building for Young Adults
You will have many questions as a young person trying to get credit. This is normal.
This section answers some of the most common questions about credit scores and young people.
Do you think it is a good idea for credit to be developed as soon as possible.
It seems like a smart idea to build credit as soon as you can. This will help you acquire better and larger things as you age.
Anyone looking to obtain a mortgage loan before they turn 25 should begin building their credit scores as soon as possible.
However, temptation is a crucial factor. You should not be the type of person who takes their credit and spends it immediately on a new TV, great shoes, or an iPad. Any harm can have a substantial impact.
It is up to you when and how fast you should create credit. However, it is a smart idea to begin thinking about it once you turn 18.
Is it possible for a 16 year old to have a credit-card?
What age do you need to be to obtain a credit score
When you turn 18, your credit score will begin. Anything you do before that is just habit-forming, for the better or worse.
How can I quickly improve my credit score when I am 18 years old?
There is no quick fix for credit building. Anything promising a quick fix is likely to do more harm than good.
It’s not difficult to build a credit profile the first time. Follow our advice and you will be in a good place.
How can I improve my credit score while on alert?
Like any other subject, learning how to create credit takes time and effort.
Be skeptical of the hype and don’t fall for any advertising. You should thoroughly research deals such as 0% financing and quick loans for people with bad credit before signing the dotted line.
Pay attention to the terms. 0% financing is not available for the first year, and payday loans are so high in interest rates that borrowing for one week could prove financially crippling.
Research any loan or financial package carefully. Compare UK Quotes’ vast collection of articles on personal finance for helpful hints.
How can I improve my credit score the best?
Slow, steady growth with well-managed credit cards and finance contracts (such mobile phone or automobile leasing contracts) and loans combined with the determination to not miss a payment will ensure you are in a secure financial position for your entire life.
Do not borrow more than you can afford. Get help immediately if you have trouble paying your bills.
Check your credit reports today with Checkmyfile. It’s completely free for 30 days, and then you’ll pay PS14.99 per month. You can cancel anytime for no cost if you don’t like its services.