Tools to help young people boost their credit rating
July 24, 2018 (Investorideas.com Newswire) When you turn 18, you are automatically provided with a credit score. This is a numerical value that confirms your creditworthiness and is used by potential lenders and credit providers to determine whether you will be suitable for their products. The information is held by credit reference agencies who make this information available to lenders and providers at a cost.
The issue with being a young person is that you automatically have a zero score and therefore, potential lenders have no support as to whether you are a good person to lend to. Below we explain some of the best tools and techniques to build up your credit score so that you can improve your access to loans, credit cards and mortgages.
Join the electoral roll
By joining the electoral register, you are confirming your name, date of birth and address with the local authorities. This is something that is picked up by credit reference agencies and therefore potential lenders have access to this too. This is completely free to do and gives any future applications more credibility since it confirms you are a real person with a residence and not someone without a physical address or constantly on the move.
Credit builder cards
Certain providers will offer credit cards specifically to help you build up your credit score. As a young person, you do not even need to be borrowing that much per month, it is simply to get you into the habit of making regular monthly repayments and building up a report.
Since you have no prior credit history, the credit card rates are typically higher than usual, typically around 34.9% to 39.9% APR compared to 0% to 18% for good credit customers.
Monitor your bills closely
If you are trying to build up your credit rating, avoid things that can be detrimental to your credit score. This can be simply missing repayments for your mobile phone, monthly car payments or being overdrawn on your student loan. A credit rating is based heavily on your ability to repay bills on time, so by avoiding defaults and staying out of arrears is essential. (Source: Payday Bad Credit)
Canopy is a new tool that has just launched in partnership with Experian. It allows you to boost your credit score if you are a tenant and paying your rent on time. You must have your landlord to opt in, but this is another simple way to build up a history of repayments and improve your credit rating. If you can connect it to your credit card so that you are paying off in two ways, that is even better.
Check your credit score
The simplest thing to do is simply sign up to a credit reference agency and monitor your credit score on a regular basis. Each agency has its only tool giving you alerts every time your score goes up or down and also gives you ways to constantly improve. Whilst Experian and Call Credit have their own tools, you can also find new companies that offer this for the same price or with free trials. Thereafter, the cost may be just a few dollars or pounds per month, but it is one step closer to a better credit score and financial freedom!
Daniel Tannenbaum is a marketing consultant who has worked with several loan and finance providers in the UK. He is a regular contributor to The Huffington Post, Business.com and TechRound.
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