You probably already know that having a bad credit rating can hurt you, but having no credit rating at all can be just as bad. It's incredibly difficult to build credit when you have none to start with. Why does no credit rating make you "invisible" to lenders, and how can you build credit and improve your viability as a valued credit customer?
Why having a credit history is so important
Potential lenders look at your credit history (usually by pulling a credit report) to get a sense of how trustworthy you are. They need to "see" you to understand how risky you are to lend money to. If you have a habit of paying your obligations on time, you're a good risk. Even if you have a few late payments it's not the end of the world as long as you make good before you completely miss payments and run into serious arrears.
If you have a perfect credit rating, you may find it easy to get loans and credit advances and high limit offers on credit cards. Your responsibility level is highly visible, and you won't find it difficult to buy a home or qualify for financing on a car. Your financial institution will probably be more than willing to approve you for a credit card and maybe even other lines of credit as well.
If you don't have credit, however, you're a complete unknown. You might turn out to be responsible, or you might not. Many lenders aren't interested in taking a risk on an unknown, and since they can't see if you'll be good or not, this can prevent you from getting a loan the same as bad credit can.
Ways you can build good credit
Many different factors can affect your overall credit score. You can improve your credit by paying your regular monthly bills on time. If you share a home with someone, have at least one of the utilities put in your name, and pay your bill on time every month. Do the same with your phone bill. This can help establish a pattern of regular payment histories that can positively affect your credit.
A big change for Australians and credit scores came when the major banks uploaded mortgage information into the comprehensive credit reporting (CCR) system. 80% of all Australian held mortgages now have the monthly payments recorded for CCR. If you own your home, this means you have a perfect way to prove you are responsible, simply by always paying your mortgage on time.
If you can apply for a credit card, even one with a low limit to start, you can start building a credit history by using it responsibly. A credit card that you use responsibly will also build your positive credit profile for CCR, allowing you to raise your credit score and qualify for even more credit.
BOQ's range of credit cards includes a number of great features that can help you start building your credit today. So, if you're ready to start building your credit and cast off the cloak of invisibility, why not stop by your local BOQ branch and apply for your first credit card today?
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