How to prepare yourself when you borrow money
Getting a loan is not as easy as it is portrayed on the TV or radio. Seemingly unrelated things like whether you are live at home or are childless can actually affect your credit rating. And, the lower your credit rating, the more chance there is that you will be charged a higher interest rate on any borrowing you do get.
So, what can you do to ensure your credit rating looks good when you do apply for a loan? The answer is to prepare!
Here are top tips on building a good credit profile:
· Make sure that you meet all your financial commitments on time. Never miss a payment or make one late. You need to do this for at least twelve months for all your bills whether it is a mobile phone bill or credit card bill
· Do not go overdrawn at the bank – your credit file needs to look perfect
· If you haven’t already got one, open a savings account. Having a savings account (with a balance in it, however small) can help build your profile
· Have ‘positive’ housing. Living at home with parents or with friends does not look good on your file. Become a homeowner or a tenant in an unfurnished property as this will boost your credit score.
· Make sure that you have a bank account and that you manage it responsibly
· If you don’t already have a credit card, apply for one or two over the space of six months. Then never use them! If you do use them, make sure that you pay the balances off in full every month.
You need at least twelve months of putting these tips in to practice. This will demonstrate to potential lenders that you are responsible at managing your money. While it may seem a long time to wait to apply for a loan, in the long run it will be better for you financially if you build up your credit profile.