As someone who was long term unemployed for a while, I couldn't get anything in credit - because I had no credit rating.

Here's a couple of little tips I learned when building up my credit rating since, that hopefully others may find useful:


Quantity not quality

1. It's not about how many types of credit you use - it's all about how much credit you have overall. So boost your credit rating by using various methods as appropriate and do so with larger and larger amounts where possible.

Sound like an invitation to get into bad debt and it absolutely is - that's credit for you. So remember, whatever you do, keep everything in moderation and make sure you keep well within affordability.


Credit Cards

2. Make sure you have a current account with a bank. Once you've been with a bank for 3-6 months, ask for a credit card with a small limit. Once they accept, use it infrequently and ensure that you pay the balance in full everything month, such as by Direct Debit.

TIP: Pay for normal groceries with a debit card, and put all other purchases on your credit card. That way, not only can you build up credit rating, you can also identify all of your extraneous outgoings on the credit card statement that you can look to cut down on.

NOTE: After a few months of paying off your credit card, ask for the limit to be raised - even if you will never use it to that limit.


Loans

3. Get a loan. Been thinking about a new car, new home entertainment system, or a big holiday? Then don't save up for it - get a loan.

Reason being, a lot of loans are dirt cheap at present - it should be too hard to find anything between 5%-8%, depending on the lender and the amount to be borrowed.

TIP: Again, do ensure you don't push yourself - better to extend the repayment term slightly longer than you planned - ie, 3 years instead of 2 - to give you a little extra room on the payments - and then pay it off more quickly when you can. Of course, ensure there's no early repayment clause.

The good thing about loans is that they are a good way to build up a larger debt - and a record of paying it off - while still ensuring a reasonable interest rate.

ANOTHER TIP: Also use loans instead of Hire Purchase (HP) - HP interest rates are usually very high - 29% is pretty common. Compare that to a loan rate of even 9% and the difference should be pretty clear. Also, you own what you buy with a loan outright, but with HP you're leasing, and often there can be restrictions and extra charges for usage under certain circumstances.


Mortgage

4. Nothing gets your credit rating up like a mortgage, because mortgages are built for paying off very large sums.

While renting has advantages in certain personal circumstances, because of the general upwards trend in property values, it always makes sense to invest in property - even a small one - simply for the purchase of assets that it provides.

And if you're looking to build up a credit rating in general, a mortgage on even a small property will probably give you more a boost than all of the above methods combined.


DISCLAIMER: All simply my personal opinion. Debt can be a bomb if used incorrectly, so don't be stupid with it.

Good advice. I just wanted to chime in with something I learned regarding credit cards. Don't accept every card your'e offered. Think about it if youre new to credit why do they want to give you a 2,000 dollar credit limit? Find out what's the percent intrest charged, is there any account protection if you suddenly become unemployed?

Absolutely a good idea - credit cards are an area especially filled with pitfalls. Tread carefully!

yeah, especially with those 0 interest credit cards! you really have to study the terms and conditions before accepting the offer. of course you have to have a good--if not an excellent rating to be given such an offer.

You owe so right about the O interest rate. You really need to read the fine print. I think in a way they should really teach kids in highschool more about how to get a credit line established and how to stay out of debt. You see so many young people get buried in debt because of credit cards.

brian,

Thanks for these great, easy to understand tips. I think these are good for anyone, regardless of credit history to keep in mind to keep credit positive. I will pass these on too!

Thanks again,
metrogirl

Just to add, my original comments were a little bit simplified - this little piece here mentions that the FICO credit scoring is made up 30% of your debt: