Establishing Your Credit

Your credit report will be used by any credit lenders you apply to as a determining factor in whether or not your application will be approved or declined. All offers, along with interest rates charged, will be determined on the basis of how your credit report is rated.

Listed below are a few basic tips on how to build up a good credit history and use it as an asset.

• If you don’t already have one, open a bank account with at least some form of debit card and if possible even open a savings account. Any incoming payments will indicate you have money and by using your debit card or setting up direct debits, this will show potential lenders that you are capable of managing it.
• Any credit cards or store cards you apply for must be used responsibly. Make sure you pay your bills on time and do not default on the minimum monthly repayments. Remember to allow at least 5-7 business days for any payments made by post. Try to overpay on your monthly payment whenever possible as this will reduce the overall repayment term and lower the amount of interest added to your balance. Regular payments can only go in your favour and should the lender report to a credit bureau, you’ll be one step closer to establishing a good credit history.
• Only apply for the cards you need and don’t be taken in by any free gifts or rewards that may seem appealing or a good incentive to take on another credit card. The more cards you have the more debt you are likely to run up. Remember too that each application you make will be noted down on your credit record and too many applications within a short space of time may result in your credit application being declined.
• Keep track on your spending by keeping a record of all purchases you make with your card. Check statements regularly as a measure to keep within your credit limit. It is all too easy to use your credit card for minor purchases which only adds to your outstanding debt.
• Should you already have a bad credit history you will not necessarily be denied a credit card however, you may only be offered a higher interest rate. Late payments and any defaults will of course be noted down on your credit record so the only way you can improve your credit is to take action and start getting out of debt. By paying your bills on time and only borrowing within your means, you will see your credit rating gradually improve.
• Since all credit applications are recorded on your credit record, it may be a good idea to shop around asking the lender for a quote only before actually going ahead with any application.
• Do check your credit report on a regular basis to make sure it is both up to date and correct in the information it contains. This is also a good way to check for any identity fraud that you may not have been aware of. Any incorrect data can be amended.
• Be as accurate as possible when giving details on your application form. Any white lies or information you choose to omit will be discovered in the long run causing you further problems in the future.

For further information check with a reputable financial advisor or your local Citizen’s Advice Bureau.

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Published on September 29, 2007