+ Jess Chai explains the easiest ways she built up a good credit score which is essential for obtaining a mortgage in the property investment world.
If you plan on getting a mortgage sometime in the future, your credit score is vital. When I graduated from university I had no credit cards, no store cards, had never been in my overdraft or borrowed money (bar the standard student loan). I assumed this meant I had a fantastic credit score, I was like “Yay! Look at me, I’m so great. I have never needed to borrow money. Banks are going to love me!”
Oh to be a fresh graduate! According to the banks, my credit score was crap. I learned the hard way that no credit score was just as undesirable as a bad credit score. Originally this sounded illogical to me. I never borrowed credit because I always made sure I had enough, but someone gave me an example which shifted my perspective:
“When companies hire, who is a safer bet? A candidate with no experience of a job; or a candidate who has a good track record and positive references from previous jobs?”
Here is a practical step you can take to build up your credit score:
Make sure you are on the electoral role!
This is linked to your credit score rating. Banks want to see you have a stable, traceable location. Signing onto the electoral role gives them a little confidence that you aren’t a terrorist money-launderer.
As I’m in my twenties my address changes more frequently than the banks would like. Therefore I am registered at my Mum’s address.
When applying for a mortgage, banks will ask for a proof of address. To make your life easier, get bank statements sent there and ask your kind parent to either forward on to you, or put them somewhere safe for when you need them. Nowadays we access our bank statements online so it’s no biggie to have paper copies sent to in my case, my mum’s address. Mobile phone bills are not always accepted by banks, credit card statements are better.
Use a stable address
Banks also want to know where you have been living for the last three years. It’s far less paperwork if your record shows that you’ve been living at your Mum’s for the last three years. It doesn’t necessarily impact your credit score if you’ve lived in more than one address within the last three years, but it does mean you have to fill out more boxes on their super long forms.
University was a ball ache when it automatically registered me onto the electoral role at uni accommodation. At the time I thought nothing of it but fast forward four years, if I give my Mum’s address to a bank or a credit card company it didn’t always match up with their computer searches.
They have my university address on there as I did not register at my new address. I’ve sorted it now but it was messy and time-consuming to deal with. I wish I had known the importance of being on the electoral role back then! It would have saved me a lot of hassle now.
Go for it!
In summary, if you want a smoother ride and an improved credit score, register on the electoral role at a safe and stable address that you can send and receive post from (either your own or with someone you trust). If you wish to borrow money in the future you will need to provide evidence you live there. Get bank or credit card statements sent there. It will save you so much hassle in the future.
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Image Credits: Sean MacEntee.