Finance Calculator: how to build good credit

A good credit rating will not only allow you to take out a loan or mortgage, it will also mean that interest rates are lower. Build your credit with these easy steps...

1. Check your credit report

   See what lenders are saying about you and use this information to improve your score. The credit score is a three digit number used to assess your financial reliability. You’ll also see if there has been any identity fraud or bogus accounts opened in your name. If there has been, you can get this cleaned up.

2. Apply for a credit card

   Some credit card providers issue cards designed to help build credit. These are likely to have a low monthly limit at first, but once you prove that you are credit worthy it will increase. Use your card to fund medium sized purchases and make regular payments every month.

3. Use store payment plans

   Many stores will offer finance on more expensive products, such as a $40 a month sofa. Providing that you make the payments on time, these will improve your credit score.

4. Open a checking and a saving account

   It shows financial stability.

5. Apply for an instalment loan

   To get the best credit scores, you need a mixture of credit types. In addition to a credit card, an instalment loan can boost your ratings. Keep the repayment period short to minimse the interest you pay.

6. Don’t use all of your available credit

   Keep your spending to around 30% of your limit for the best possible score. You don’t have to carry any balance over to improve your credit rating – paying your card off in full each month will give you good credit and stop you getting into debt.

7. Borrow someone else’s credit

   By co-signing or opening a joint account, someone else can transfer their credit history to you. Just remember that any missed payments you make will reflect badly on them, and vice versa.