6 Ways to Build Your Credit

By August 26, 2019 No Comments

Having good credit is vital when applying for a loan – whether that be a home or a personal loan. Why? Because, with a great credit score against your name, you can:

  • Negotiate a better deal with a personal lender
  • Seek and secure the best deal among financial lenders
  • Take advantage of any potential bonuses, such as lower rates and reduced fees

With more than one-third of all New Zealanders only just getting-by financially, more and more are turning to affordable credit to meet their financial responsibilities. If you are looking into building credit but are not sure where to begin, here are six ways to get started.

1. Remain credit active

It’s a common misconception that, when building credit, the best way to secure a favourable score is to never actually apply for credit in the first place. This couldn’t be further from the truth.

When assessing your loan application, lenders look at your credit history to determine how responsible you are with borrowed funds. If you don’t have a history, the lender is essentially entering into an agreement blind. For many, that’s just not a risk worth taking.

2. Pay your bills on time

If you are wondering how to build credit, remember that paying your bills on time is crucial.

Loans and credit cards aren’t the only things that affect your score. Whether or not you pay your bills, including electricity and telephone and internet service providers, is reported to credit bureaus, too.

3. Keep your credit cards open

Credit cards with maxed-out balances and overdue repayments will certainly be a detriment to your credit score. But, accounts with low or no outstanding balances that demonstrate regular, on-time repayments can actually help in building credit.

4. If you see an error, dispute it

Human error is a very real thing, and it’s not uncommon for lenders and service providers to make mistakes. If you spot an error on a bill or your credit report, take the time to dispute it.

Remember, your credit score can significantly impact your ability to borrow money. Don’t let little mistakes go, as this could come back to bite you in the future.

5. Don’t submit multiple credit applications

If you’re just beginning to build your credit score, making too many credit applications is not a wise idea.

Each time you submit an application, the lender will check your credit report and make a note on it. Too many of these enquiries from different credit suppliers can make you look desperate and can reduce your credit score. Lenders may hike up your rates or fees or reject you altogether.

6. When it comes to finances, be disciplined

There is no quick-fix way to build credit – it’s an ongoing process that can fluctuate throughout your lifetime. If you really want to know how to build credit, remember that, when it comes to finances, always be disciplined.

Pay your bills on time, keep your credit balances low, prove through your actions that you will act responsibly with borrowed funds. If you can stay on top of these, you should have no problem building and maintaining a great credit score.

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