A friend of mine wants to know: How do you build credit if you don't have a credit history yet?
hi, you build a good credit score or report by paying anything you have on credit ie, car finance, credit cards etc on time and regularly until the amount owed is payed off. Next time you want credit it should be slightly easier to get it. Keep details of the names and addresses of the companies you have dealt with. Over a period of time if you keep borrowing, mortgage, car loans etc and paying them off your credit report will be favourable, so your seen as a good person to lend to.
The best advice i could give is, save some money, with a larger deposit you will find companies more eager to lend.
Getting credit if you have no credit history can be trick as there is nothing for a lender to gauge your credit worthiness on. If you want a loan of any decent size, there is slim chance of getting it.
The best way of getting a credit history is to take out a credit card (these are usually quite accessible if you are working) buy your monthly groceries with it and pay off the balance each month. Set up a direct debit at your bank to do this so you don't forget. After a few months, you will start to have built a credit record which prospective lenders will be able to see. Whatever you do, do not go mad with the card and buy things that you would not normally buy. You run the risk of overspending and getting into the trap of letting the balance run from month to month, You also run the risk of missing payments - a definite no no - which will also appear on your credit record showingthat you are a bad risk!
Another way of getting a loan without any credit history is to use a Guarantor loan. This is where a 3rd party acts as a guarantor effectively promising to pay back the loan if you fail to repay it. The lender uses the guarantors credit history not the borrower.
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