Best way to build up credit rating at a young age?

-matt-

What should young people do to start building up a good credit rating? Or is doing anything pointless? I was just wondering if doing things while young would help out in the future if I was going to get a loan for a house, etc...

jamesd

Some things:

1. Be on the electoral roll.
2. Have and use regularly a credit card. Paying it off each month is fine, it's use that matters.
3. A small personal loan. Pay almost all of it off immediately. Then the interest for the rest of the loan term will be minimal but you'll still get the steady stream of on time marks on your credit record.

Ensure you pay by direct debit from an account that will never not have enough money to pay the bills.

The joint use of loan and credit card is because they are different types of credit and having different types can help the score.

gb12345

^^^everything he says + look to get a mobile phone contract.

opinions4u

1. Voters roll.
2. Job stability.
3. Address stability.
4. Wage paid into current account.
5. Pay all bills on time.
6. Credit card that you use for purchases only, clearing the bill fully each month.

Beyond that, there is no need to pay for phones and loans you never wanted.

19lottie82

jamesd wrote: »

3. A small personal loan. Pay almost all of it off immediately. Then the interest for the rest of the loan term will be minimal but you'll still get the steady stream of on time marks on your credit record.

No need for this. And as far as I know, there is no such thing as a "small personal" loan with "minimal" interest.

A credit card paid in FULL every month, will suffice.

Also, try a 30 day contract, SIM only deal.

jamesd

A small personal loan with minimal interest cost is one for say £1,000 where you pay off £990 in the first week, leaving you to repay £10 plus interest on a declining balance starting at £10 for the next three to five years. Maybe a couple of Pounds of interest a year to pay.

DCFC79

opinions4u wrote: »

1. Voters roll.
2. Job stability.
3. Address stability.
4. Wage paid into current account.
[STRIKE]5. Pay all bills on time.
6. Credit card that you use for purchases only, clearing the bill fully each month.[/STRIKE]

Beyond that, there is no need to pay for phones and loans you never wanted.

I had 1 to 4 in play when I first started working back in the day. Didnt get first contract phone until I was about 20/21 and didnt have first credit card until I was 23/24, not had a need for a loan yet but if i did need 1 then I could have gotten 1 at a suitable rate.

To date I still haven't had a need for a loan and my credit rating is still good. Everything is paid on time and my accounts are run like clockwork.

I guess you could add 7. Keep your current account in the positive/run your account well.

gb12345

jamesd wrote: »

A small personal loan with minimal interest cost is one for say £1,000 where you pay off £990 in the first week, leaving you to repay £10 plus interest on a declining balance starting at £10 for the next three to five years. Maybe a couple of Pounds of interest a year to pay.

Loans don't work like that.

If you pay of the £990 then the remaining £10 would be cleared by your next payment.

jamesd

Loans do work like that and I've used one in the way described here. The payments are not normally fixed but vary to keep the term the same. Some loans offer choices in how you can have them work, and some may default to keeping the payment the same but that's not the normal way they work.

For this purpose you'd pick one of the normal ones that keeps the term consistent.

MoneyGenius

Be registered on the electoral roll for atleast 2 years at the same address.
Have atleast 1 current account open for atleast 3 years.
Keep within overdraft/credit limits - paying credit cards off in full is irrelevant to future credit, aslong as you make atleast the minimum payment that will suffice.
Have your salary paid into the same account that your bills are paid from.
Have your bills paid by direct debit.

Lenders are looking to see you managing your finances within your limits, and prefer as much activity in terms of credit and bills as possible to show you can manage several payments and are responsible with credit.

Source: Banker