Having a good credit history is essential if you plan on borrowing money anytime in the future. It will also help if you are searching for a home or a job in the financial sector as many employers and landlords perform credit checks before a contract is signed.
If you have no credit history due to the fact that you are young you are much luckier than those that need to rebuild credit due to bad debts.
People with no credit history need to simply take out a loan, credit card, overdraft or hire purchase in order to establish a credit history. Of course you will need to have a few things before lenders will consider letting you borrow money. The first is of course some form of income. The second is identification and the third is proof of address. Lenders will also look at how long you have been in your job and how much money is left over after paying for items such as rent and power.
If this lending is approved you will need to make you keep up with your payments and are not late. By having a good payment history lenders know that they can trust you. This will come in handy if you want a mortgage a few years down the track.
If you have bad credit rebuilding your credit history will not be that easy. Firstly you will have to find a lender that is prepared to lend to someone who has bad credit. This means that you will end up paying high fees and high interest. Once you have this loan you will have to make timely payments and wait until other lenders are satisfied that you are a good credit risk.
If you are bankrupt your situation will be far more difficult than someone who has bad credit or no credit. Be prepared to spend a good few years not being able to obtain credit or paying high interest rates. However credit can be built up again after bankruptcy – it will just take a lot of time.
Building up your credit rating simply means that you take out credit and make regular payments on a timely basis. Since many of us do this anyway it will not be an issue for most people. Those with no credit or bad credit will have to work a little harder to get a lender to lend them money.