Taking out personal loans for credit rating building

TAWhite1994

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Ok, so I am aware that lenders use the records offered by all 3 companies to build a credit profile of you. However, as quite a young person at 18, you can imagine my credit report looks pretty blank leaving lenders very little information to go off and of course, time tested repayments on time are a large part of the credit scoring procedure.

My question is if I take out a loan for say 3 years for a small amount, say around £3,000 which is easily affordable to pay off even with a high interest rate, then make on-time repayments for the full term of the loan, would this be a significant boost to my personal credit rating as I hope. Given I soon qualify for a very healthy career which is also very stable, would this be a good route to go in combination with other methods such as using credit cards and utilising 30% of my overall credit per month with sound repayments on time.

Of course repayments will barely change my financial sheet and will be easily affordable so repaying is no problem at all and the initial £3,000 I could probably just use for a nice holiday for the timebeing to be honest as it's always nice to get away.

JuicyJesus

You would pay a lot less in interest (nothing, in fact) and build your credit rating far more easily if you just get a credit card, buy a sandwich on it each month and then pay it back in full.

You also do not NEED a nice holiday, and you especially should avoid taking out credit for things which will last less time or give you less of a lasting benefit than the credit itself.

TAWhite1994

JuicyJesus wrote: »

You would pay a lot less in interest (nothing, in fact) and build your credit rating far more easily if you just get a credit card, buy a sandwich on it each month and then pay it back in full.

You also do not NEED a nice holiday, and you especially should avoid taking out credit for things which will last less time or give you less of a lasting benefit than the credit itself.

I don't need one, I merely said it would be nice

I have been planning on the credit card part you mentioned and will be utilising that also, I meant would this idea serve as a counterpart to it to quickly build a rating as I'm in a strong financial position as of July and would preferably like to get a mortgage in a few years.

UsetheFORCE

TAWhite1994 wrote: »

I don't need one, I merely said it would be nice

I have been planning on the credit card part you mentioned and will be utilising that also, I meant would this idea serve as a counterpart to it to quickly build a rating as I'm in a strong financial position as of July and would preferably like to get a mortgage in a few years.

Apply for a credit card, Capital One Classic would probably be the best and use it for say £20 a month and pay it back in FULL on receipt of the monthly statement.

No interest to pay...

Also get a card from say Vanquis... will raise limits faster than Capital One I believe.

2 cards should do the job....

Apples2

If ever there were a template model for a future financial disaster, the OP is it!

At 18 considers a £3,000 loan a "small" amount, states the repayments can " easily be afforded", no concern whatever for interest rates and to cap it all, doesn't even need the loan so will waste the lot on an unnecessary holiday.

Slow down OP and do some reading, there are many ways to good credit ratings, none of which involve throwing cash away as you seem determined to do.

somethingcorporate

I don't think there is any such thing as a secure career - especially when you are so young.

What do you do OP and how much do you currently earn? I doubt many institutions would lend you £3k.

The best option is the credit card one - no interest to pay compared to the massive wedge you'd end up handing over if you borrowed that amount. Start small and build it up - it is a credit history and not just the reflection of a single transaction or two (although making an error on 1 transaction could certainly balls the whole lot up for you!).

Naf

As above; credit card is the way.
I don't think any card will boost your rating more than any other - its the payment history that does the work, not the issuing bank; and even then its dependant on the application criteria of who you want to apply to in the future with your 'better' credit score.
In light of this, I'd suggest looking for a cashback credit card - because you intend to repay in full each month you might as well get something back for free.
Do be wary, though, that a credit history of always paying in full each month can actually lower your chances of a successful application in some circumstances with some lenders (usually only for credit cards), because they don't think they'll ever make any money from you.
Martin has an excellent post about this on the site somewhere, although I can't find it offhand...

EDIT: Here it is http://www.moneysavingexpert.com/loans/credit-rating-credit-score
turns out its the general page, not a blog post like I thought. Looks a little long, but well worth a read!

UsetheFORCE

Naf wrote: »

As above; credit card is the way.
I don't think any card will boost your rating more than any other - its the payment history that does the work, not the issuing bank; and even then its dependant on the application criteria of who you want to apply to in the future with your 'better' credit score.
In light of this, I'd suggest looking for a cashback credit card

The OP is 18 with no credit history, which cashback cards would you suggest?

Personally I would apply to the provider who will most likely give the OP the CC at the first time of asking!

After all, they don't need the credit, they just want it appearing on their file.

guesswho2000

UsetheFORCE wrote: »

The OP is 18 with no credit history, which cashback cards would you suggest?

Personally I would apply to the provider who will most likely give the OP the CC at the first time of asking!

After all, they don't need the credit, they just want it appearing on their file.

The Aqua reward card, gives cashback and is a sub prime card, suitable for those with poor/no history.

Naf

guesswho2000 wrote: »

The Aqua reward card, gives cashback and is a sub prime card, suitable for those with poor/no history.

Precisely my thinking.
I have one and my rating is poor - someone with a clean slate will probably be OK too.

MJ41

If your credit rating is decent enough for you to be accepted for a £3k loan, why do you feel it needs boosting? I wouldn't ever advise anyone to take out credit for no reason!