How to Build Your Credit Profile

I wrote last month detailing how you can improve your personal credit record, but if you have no record to begin with then many of you may be struggling to build up your profile from scratch.

If you don’t have any credit history, it can be extremely frustrating when you’re trying to be approved for any type of credit. Without having any credit history, lenders will see you as an untrustworthy person to lend money too, and we can’t really blame them can we? However, if you understand what lenders want to see from your credit history then using a few simple techniques can see you approved for funds.

It’s Not a Science

Getting approved for credit is not a science, it’s actually very simple; you need to show potential lenders that you can borrow money and pay it back on time without any issues. But if you can’t lend any money in the first place, then how can you prove to them that you’re reliable?

What Are the Lenders Looking For?

When you first apply for a lender to loan you money, they will first check your personal credit profile, and this is where they determine if you are a risk free borrower. Of course, if you have no credit history then your profile will be empty; in this case they will look at other aspects of your life such as your employment history, they will note how long you have been working for, and your ability to maintain a steady job will be seen as a positive for them.

How You Can Build Out Your Credit Profile

Establish a checking or savings account – Many people don’t see the importance in this but lenders often see bank accounts as a sign of financial security and stability. By opening a savings account, even if you just add a minimal amount to it at regular intervals, this will show lenders that you have some financial history.

Use a specialized credit card – Credit builder credit cards are brilliant to get you on to the credit market. They are designed for people who either have no credit, or if they are looking to rebuild their credit. They come with a low and easy to manage credit limit but the interest rates can be quite high.

These cards are not designed for big spending so use the card for small purchases and make sure you pay them off in a timely fashion to ensure that you appear to be a risk free borrower.

Take out a store card – Department and supermarket store cards are good for saving money, and they can also be good to help build out your credit profile. They tend to be easier to be approved for but this doesn’t mean it’s an excuse to go and spend money that you don’t have.

Use the store card to make a few purchases but make sure you pay off the limit before the end of the month, this will stop you accruing interest and it will give your profile a boost.

Use someone else’s good credit – One thing that people fail to realise is that you could piggyback someone else’s good credit to your benefit. For example, a family member could add you to his/her credit card account making you a joint account holder.

The history for that credit card will be used to help your own personal credit profile giving you an instant credit record. Remember though that there are risks using this method, whilst inheriting the good, you also inherit the bad, and if the account in question has had difficulties in the past with payments, this will show on your personal credit file.

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