How To Build Credit Responsibly!

By estherbangura | Credit Score/Report

Aug 05

How To Build Credit Responsibly!

In today’s world, having credit is a norm, a need and a must. Credit is necessary for almost every aspect of modern life. For example, renting a car, buying furniture, buying and renting a house, having plastic surgery and even having a funeral. Creditors rewards you with low interest rates, better offers and more credit depending on how responsible you are with money, based on your financial history.

See how relaxing it is building your credit score responsibly

Who can benefit from this topic?

In my previous blog, we looked at what credit scores actually meant and what creditors look for when considering your application for credit. If you haven't read it, you may want to take a quick glance before you continue reading.

This article is mainly aimed at those who want to build good credit and may not have any credit. If you have just finished University and  starting to earn an income etc, then now may be your first opportunity to really build your credit responsibly. Although this article is not directly for those who have poor credit and want to rebuild, you will also benefit from reading it.

Using a secure credit card to build credit

Secured credit cards can be a good way to build credit, especially for those who have bad credit. However, if you are not managing your finances well, as in- not budgeting, not paying your bills on time or behind on bills, then no way should you be obtaining secured or unsecured credit. The reason being - if you can’t be responsible for the money you are working so hard for, how will you be responsible for managing money that’s been borrowed to you?

So the first lesson is to learn how to be responsible with money before you use credit cards to build your credit. Otherwise, you will do more damage than you realise. If you do decide to use credit cards to build your credit then only use a secured credit card between £300-£500 to build your credit. You don’t need thousands of pounds in credit to build your credit, so therefore there is no need for a £1000 credit card. 

Build slowly and steadily by managing your finances well

Pay your bills on time, don’t do too many credit searches. Maintain a  30% credit utilisation and never go over your limit. Save for what you want to buy. Review your credit report for free monthly to minimise the chances of fraud and to ensure your details are up to date .

Don’t co-sign or be a guarantor for anyone (and vice versa!)

Often times if your credit is bad, creditors will decide to give you credit on the basis that somebody who has good credit makes a legal commitment to repay your debt if you are unable to. Not only should you never co-sign for anyone, you should never put that burden on anyone else.

Having credit will never be a life and death situation, where someone else puts their neck on the line. Have you heard of stories where friends, family and colleagues have cosigned for student loans and mortgages, only for that person to find themselves in a position where they can no longer make payments, have an accident and or worst case, they die. In such cases the co-signer, or guarantor has to pick up the pieces. To be fair, the UK it’s not as bad as the USA where the student loans are equivalent to mortgages. However, guarantor loans could still leave you financially handicapped if you can’t pay or end up paying for someone else's debt! After all you signed for them!

Build your credit with retail therapy!

You can apply for a store card at your favourite retail store with a low limit like £50 a month, and use this to buy your clothes every month. By keeping the limit low, you can be sure to pay it off in full each month. At the same time, you can also enjoy some retail therapy, without having to take on the burden of debt to build up your credit rating. As long as stay within your limit and pay your bills on time, this type of credit can be beneficial - but remember to do so responsibly.

Yes build your credit! But do this responsibly by avoiding debt!

Although it’s important that we build credit so that we get the best offers for services and products, it’s also essential that this is done in a responsible way - otherwise the opposite can happen. In building your credit, there is the risk you take on more debt, which can result in the derailing of your financial goals. If you need advice or guidance on building your credit, yo can register with any of these credit bureau’s Experian (recommended- 30 days free trail), Equifax,  Clearscore and  Call credit aka credit karama and seek further assistance. 

Take Action today!

If you find that you are overspending and not able to stick to your budget, you may want to consider joining our next budgeting workshop.

Here's Just A Fraction Of What You Will Get When You Attend Our Master Your Budget Workshop!

  • A personalised budget
  • A success plan to help your stick to your budget
  • A workbook to take away with you with lots of useful budgeting worksheet

Plus You're Getting These Amazing Bonuses As Well As When You Join Today:

  • Access to our Budgeting Private Facebook Group for ongoing support and accountability
  • Plus after making your order today, I will throw in a Cash Only Budgeting training also known as the ‘Envelope system’ to give you an alternative way to budget with cash.As you will learn, envelope budgeting is a brilliant way for people who want to physically see what they spend on and prefer using cash.

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(2) comments

Elise Ho August 15, 2019

I love your tips and think every young person should read it. Of course, so should some older people too. One thing that I always had my kids do when they first got credit cards was to set them up on autopay for the minimum amount. In this way, they were never late for payment and never skipped a payment but were not worried about being short on money. The second step to this plan was teaching them to then go back into the account and make a second payment that will be in full.

    estherbangura November 2, 2019

    Elise, I love that you are teaching your children key financial principles as early as they know how to spend money!

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