Credit rating with no borrowing

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Forums › Finance and wealth management › Credit rating with no borrowing

Reanalyse

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Ultimate Geek

#302481 26-Nov-2022 19:23

Has anyone advice on how to get a good future credit score, for buying a house in a few years, when at the moment all purchases are not using credit, but where a card is necessary a debit card is used.

Is it worth getting a credit card and always paying off before due ?

Any other low cost ways to get a good credit score ?

Thanks and Regards

cokemaster

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#3001818 26-Nov-2022 21:03

In NZ, we have positive credit reporting so having things like Power and Internet accounts will contribute towards your credit score.

To be honest - banks are mainly concerned about your ability to service the loan and your reliability on previous debts. If you have a good track record of income, keeping outgoings under control and no defaults... most banks will be a fool to turn you away just because you haven't got a credit card or personal loan.

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Linux

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#3001831 26-Nov-2022 21:17

Have you checked your credit score? You can do this free online

BlakJak

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#3001955 27-Nov-2022 11:31

My advice (and it's 20+ years old now, sadly) is to use a finance option to purchase something in the $1-2K range that you could otherwise readily afford to pay off... so the risk is low.

Then pay it off on time (or ahead of time). This builds you a positive reputation.

Subsequently never had a problem with finance.

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Wheelbarrow01

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#3003420 30-Nov-2022 02:26

Here are my tips for a great credit score (for what it's worth - not financial advice - your experience may vary)....

Using consumer debt to buy depreciating assets is a trap to keep people poor - I honestly believe that after learning the hard way in my early 20's. After struggling with multiple payments for things I really didn't need - and having a car repossessed in the process, I literally changed to a "cash only" lifestyle for a few years until I grew up and sorted my sh1t out. For me, I read a couple of books that opened my eyes and turned everything around. Off the top of my head I recommend "Your Mortgage and How to Pay it off in Five Years: by Someone Who Did it in Three" by Anita Bell. She's a bit extreme, but she reached her goal and then some...

Fast forward 20 years, and I have a mortgage, a GEM Creditline store card, a bank credit card, and Spark & Sky accounts in my name - and that's it. I haven't had any other sort of hire purchase or loan at all since the very early 2000's. Basically if I can't pay cash, I don't buy it. This extends to vehicles - which I either save for, or in the worst case I'll use my revolving credit facility with my bank which is secured against my house - and then pay it off as quickly as possible. A revolving credit 7.9% floating interest rate is far better than any loan a used car dealer will offer you.

I only buy home appliances etc on the Creditline card if they are on sale and I can get 30-60 months interest free, and I always pay each item off in full before the interest free period ends. Apart from the yearly card fee, GEM don't make a cent of profit from me.

I pay my utility bills the day before they are due each month*.

I pay my credit card bill off in full every month without fail (proving to the institutions that I never spend beyond my means). I pay for as much as possible with my credit card and redeem the airpoints for free overseas flights (or upgrades to Premium Economy) every couple of years.

For the past 3 years I have been paying more than the minimum on my home loan which probably also helps the score.

I've pretty much stuck to this formula for the past 16 years. There was certainly not a lot of disposable income back when I started.

My score is about as good as I can hope for:

*YES, I paid my Sky bill a few days late, two months in a row recently and I'm now paying the cost with a blemished record. Oh the shame 😎

Mehrts

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#3003895 1-Dec-2022 09:14

@Wheelbarrow01 w̶h̶a̶t̶ ̶c̶r̶e̶d̶i̶t̶ ̶s̶c̶o̶r̶e̶ ̶w̶e̶b̶s̶i̶t̶e̶ ̶d̶o̶ ̶y̶o̶u̶ ̶u̶s̶e̶?̶ Edit: I'm an idiot that can't read 😅

But to answer OP's question, I agree on taking out a small loan (1-2k) that you can pay off straight away in order to help boost your rating and prove that you can pay things off responsibly.

That's what I did with my first vehicle purchase. I could have paid cash entirely, but my old man said to get a small loan for part of it for credit rating purposes in the future.