When any financier is assessing a new loan application, one thing that is considered is the experience of the applicant’s previous borrowing history. This can make options more limited for someone who has not had any form of credit in the past.
We all have to start from somewhere, and you may need to prepare to establish your credit rating carefully, which can assist you in getting the best deals available for you for the present and future.
Here are some tips on how to establish your credit rating.
Tip 1 – Don’t Just Apply For Any Offer
Each time you formally apply for finance, the financier will want to view your credit file, and in order to do so, an enquiry will be placed on your file with the creditor’s name and the amount you were applying for. The more enquiries you have on your credit file in a short period of time can have an undesirable outcome on your loan application with many lenders.
Tip 2 – Get Advice
As each and every lender has very different criteria in regards to approving a loan, you could get advice from someone who deals with these kinds of transactions every day, like a finance broker. They can review your application and place you with the best lender first time, preventing too many enquiries on your credit file as opposed to you applying to many places on your own accord and having multiple applications declined for not meeting lending criteria.
Tip 3 – Be Realistic About Your Borrow
If you have had no borrowing history and are trying to establish a credit rating, don’t go for the world as a first borrow. Look at something that is a suitable lend, like a credit card with a small credit limit. Car loans are often a good security for a financier, so a $20000 brand new car seems to be what lenders may see fit as a suitable first lend.
Tip 4 – Guarantor
If your parents can assist by personally guaranteeing your first loan, may be an option to assist in establishing your credit rating. This gives the lender more security, as if you were not to abide by your terms and conditions, the guarantor may be liable, giving you more reason to adhere to the terms and conditions of your loan.
Tip 5 – Understand Your Credit File
You should understand that your credit file is what lenders will look at as a first impression for any applicant when deciding whether to grant a loan. You should learn that not only loan applications are placed on your credit file, as any form of credit will result in the provider wanting to view your file and placing an enquiry on your file. This would include telecommunication companies, utility companies and many rental companies, so not only will they place enquiries on your file, if you don’t pay these creditors on time, could also result in a bad record, known as a default on your credit file.