How To Get Good Credit From Scratch

If you’ve never had a loan before, or perhaps have had bad luck in the past, don’t be put off by the idea of getting yourself back into a better position. It can actually be quite easy to get good credit – it may just take a little time to see your efforts pay off.

If you’re looking for an answer to how to get good credit, we have more than a few ways to help you improve your credit score starting from nothing.

How Do Credit Scores Work?

Before you read on, take a moment to get a better understanding of how credit scores and reports work. Essentially, your credit score will go up and down based on financial decisions such as taking out a loan, paying bills on time (or not), enquiring for additional loans and having payment defaults listed.

You aren’t automatically given a credit score until you begin credit activity, such as taking out a credit card. Your score is generally calculated over a period of three to six months, after which you will be able to determine your credit score. Once you’ve started your line of credit, you can then take a few more steps to build your credit up from scratch.

Take A Look At Your Existing Line Of Credit

When someone asks “how to get good credit”, there are a number of ways to establish this with very little risk involved for you. Having a mix of different types of credit, such as credit cards, loans, and a mortgage, can also positively impact your credit score. However, make sure you don’t apply for multiple credit cards or loans all at once, since constantly undoing applications can in turn lower your credit score.

Take Into Account Your Credit History To Boost Your Credit Score

One of the major contributors to your credit score is your credit history, which is determined by how responsible you have been with borrowing and managing credit over time. Lenders and financial institutions rely on this information to assess the level of risk associated with lending you money. So, a positive credit history – often affected by timely payments and responsible credit utilisation – demonstrates your ability to handle credit responsibly.

Over time, a strong credit history can lead to better interest rates and increased chances of loan approvals. Lenders typically offer more favourable loan conditions to individuals with a history of responsible credit usage, since a good credit history means that you are not considered a “high-risk borrower”.

Build Your Credit Through Responsible Borrowing

Once you have established your credit file, your credit score will grow so long as your borrowing is balanced out by your ability to repay your bills. Be sure to start off by borrowing only small amounts of money at a time, as by keeping your debt levels manageable and maintaining a healthy balance between your income and debt, you demonstrate responsible borrowing habits.

In addition to this, be sure to apply for credit only when necessary. Multiple applications within a short period can be seen as a red flag by lenders. Each application generates a hard inquiry on your credit report, which can slightly lower your score.

Utilise Credit-Building Tools And Resources

Credit-building tools are a little more unconventional when compared to taking out a credit card and managing your repayments responsibly. When it comes to how to get good credit, you can choose an avenue such as taking out a joint credit card with someone who has a solid financial history.

You can also consider financial counselling. Agencies can provide guidance and support for improving your credit, usually offering financial education, helping you to create debt management plans, and offering personalised advice to help you navigate credit challenges. Counselling can help you develop a plan to repay debts, establish positive credit habits, and improve your overall financial well-being.

Once Your Good Credit Is Established: Maintain It!

Once you have a good credit score, it’s important to ensure that it remains in the green. There are a number of companies that can provide your credit score for free, including Equifax, Experian and Illion. Enquiring about your credit score does not lower it in any way, so be sure to keep an eye on it via one of the mentioned, trusted sources.

When it comes to how to get good credit from scratch, it’s simply a matter of time and responsible lending. Learn more money smart tricks on our blog, and if you’re ever in need of a loan, let Buddii Finance’s team of professional brokers help you find a loan that suits you.