How to rebuild your credit

balood_2

Hi

I have a plan to pay off my debts in the next few months and then start to rebuild my credit so I can apply for a mortgage in 3 or 4 years time.

The problem I have is that, all the advise I have gotten about rebuilding my credit was about buying stuff on credit, applying for and using a credit card, opening up a catalogue account etc

It appears all the advice is to take out MORE CREDIT and pay it off to build up a history. The thing is I don't want to touch credit ever again. There is only two things I will take on debt for, a house and a car.

Is there anyway to build you good credit without taking on more debt?

[Deleted User]

Yes. Get a credit card and pay it off in full each month. That's not taking on more debt.

If you are fearful of credit, then no, you won't be able to demonstrate you can handle credit, which is what lenders are looking for.

Dobbibill

Do you already have utility bills where you live? Some of those report regularly to the CRAs.

Do you have a mobile phone contract? That also reports regularly.

Are you on the ER? This demonstrates stability.

What a mortgage lender is looking for is responsible use of credit - without going overboard, you will need to get some credit to demonstrate this such as a credit card.

Don't use it as credit though, use it like a debit card - so only use what you can afford.
Repay in full - on time - repeat.

Steer clear of catalogues - it's not worth the hassle.

Make sure you address the reason you got into debt the first time - you don't want to repeat that.

StopIt

balood wrote: »

Hi

I have a plan to pay off my debts in the next few months and then start to rebuild my credit so I can apply for a mortgage in 3 or 4 years time.

The problem I have is that, all the advise I have gotten about rebuilding my credit was about buying stuff on credit, applying for and using a credit card, opening up a catalogue account etc

It appears all the advice is to take out MORE CREDIT and pay it off to build up a history. The thing is I don't want to touch credit ever again. There is only two things I will take on debt for, a house and a car.

Is there anyway to build you good credit without taking on more debt?

Using a Credit Card and paying it off every month isn't taking on debt, it's responsible use of revolving credit. No interest is paid and shows you can use credit wisely.


A mortgage lender wants to know that you can be trusted to manage your finances. That means using credit wisely. Carrying debt balances is bad, but not using credit at all is just as bad because they cannot judge an ability to repay without any evidence of things being repaid.


Clear any debts you have, use credit wisely, get on the Electoral Roll etc. That will increase your chances when it comes to getting a mortgage.

DCFC79

Just using your bank correctly can help.

cjmillsnun

Do you have a mobile phone contract? If not, get one. A sim only contract normally costs less for the equivalent on PAYG and shows on your credit file.

Benalibob

There is no such thing as rebuilding your credit rating, the only thing that will repair your credit rating is time and continuing to budget effectively.
You will have defaults on your credit file i guess and they will remain in place for 6 years from the date of the original default. You can have a look on your file to ascertain when these will drop off so to speak. Once all of the defaults have dropped off and you have hopefully not missed any further payments or got into arrears with anything you will then see your credit rating improve.
You could have ten credit cards and loans being paid on time every single month and a few defaults and your credit rating will not change for the better until those defaults are paid regardless of how well you manage all your other accounts.
While you still have defaults on your credit file you will find it more difficult to obtain a mortgage and will likely be offered interest rates at the higher end of the spectrum as you are a greater credit risk. While you still have debts you are less likely to be accepted at all as your affordability to repay the mortgage would be seen as limited.
The best advice on obtaining a mortgage in a few years time is pay off your debts as quickly as possible and start to save a decent amount of money for a deposit after they have been paid off. Ensure that you can show that you have a healthy budget surplus each month so that you will easily pass the affordability checks with the mortgage provider. Saving a regular amount towards your deposit for your home in the run up to applying for a mortgage is a good way to show you are able to manage your finances well.