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Once you turn 18, the world of credit is accessible to you.
You can have a phone bill in your name, credit cards, utility bills, take out various finance options, open an ISA and are now eligible to pay *council tax. The world of finance is your oyster and your options are not limited to what I’ve listed above.
This sounds exciting, everything you’ve ever wanted is at the end of an application, but this is where the problems begin. If you are not aware, the financial backlash can be crippling.
Any negative mark on your credit file takes 6 years to clear. You may be happy to wait 6 years as by this point from 18, you’ll be 24. However, again as the theme of this blog is property acquisition, some lenders are not happy to lend to anyone that has ever had a default, CCJ etc regardless if this is shown on your updated credit report or not.
- Pay your bills on time
- Avoid non-official credit websites
- Disassociate yourself from anyone with bad credit
- Get on the electoral roll
- Build healthy savings
- Be aware of when Direct Debits are scheduled
- Keep your childhood bank account right through to adulthood
- Live in your Bank overdraft (If you don’t have one, the better)
- Avoid checking your account balances**
- Make multiple credit applications just because you can
- Buy everything on credit when you can afford to pay by cash
- Frequently open and close Bank Accounts
- Have a credit card balance higher than 30% of your credit limit***
- Be linked to multiple addresses
- If you know that you’re going to apply for a Mortgage, DO NOT take out any form of credit for a minimum of 3 months, preferably 6 months if doable.
**Some people don’t like checking the balances of their current accounts. They’re scared to see how little money they have left and subsequently go in to an un-arranged overdraft
***Credit limit £2,000, do not use more than £600
Tip: If you started following my blog, you will know that for the last 12 weeks there has been a theme titled, “Mortgage Monday’s”. If your ultimate desire is to acquire a mortgage hence your following of this blog, I’d highly advise that you are registered on the voters roll, this boosts your credit score and legitimises you in the realm of credit.
*Council Tax – if you come from a single parent home, whilst you and your siblings are all under 18, your mum/dad is entitled to a 25% single persons discount. That means that if your annual council tax is £2,000, your parent will only have to pay £1,500. As soon as your eldest sibling turns 18, your parent is no longer eligible for this discount and has to pay the full £2,000. It’s only right that you chip in!
Council tax is calculated per household, not per person.
- My parent took out finance in my name and now I have a bad marker on my credit file. What should I do?
You have 2 options.
Option 1 contact the financial provider, explain the situation and see if this can be resolved via Experian. You will need to provide your parents details so that they can take ownership of this problem – sooner rather than later.
Option 2 Take the financial hit. Try and make an agreement with the financial provider. Pay the outstanding balance sooner rather than later. This will be labelled on your credit file as paid. The marker will remain, but at least you’ve taken accountability and show potential financial providers that you will pay, eventually.
- I have a CCJ on my credit report will I be able to buy a house?
Yes you will. There are some specialised lenders that target people with bad credit. The unfavourable nature of these lenders is that they have really high interest rates. Yes they will lend to you, however if you didn’t have any negative markers on your credit file, you would of been able to get a Mortgage from a lender offering you a 1.89% interest rate instead of the 5.08% interest rate from the specialised lender.
- What’s the best company or website to keep an eye on my credit?
They’re the only credit scoring site that I would suggest. If you’ve never used them before you get their full package for free for a whole month, thereafter it is ***£15 a month.
Experian break down your credit in to different sections and explain why your credit score is X out of 999. They also give you advice on what to do in order to increase your credit score.
Lastly, most if not all lenders use Experian in order to attain information on your credit, so it’s brainless! Have an account with the body that is solely influential on your future. They are also the body you’d call regarding point 1 and someone else defecting your credit. They have the capacity to remove/resolve markers on your account.
***If you don’t pay for the monthly membership, you get the basic overview of your account. They show you your credit score out of 999