Building your credit score early
THERE’s a lot to think about when you start your first job, from performing well in an environment that’s new and unfamiliar to the complexities of the work you’re assigned.
Unsurprisingly, your credit score may be the last thing on your mind.
By the time your pay cheque lands in your bank account, you’re probably more concerned with paying the rent, getting some new clothes or working out how soon you can buy a car.
What you do with your first salary payment is important, as the spending habits you develop at the outset can have long-term implications for your financial future.
Credit score
Usually your financial track record begins when you start earning a regular income. This will open doors to financial products including credit cards, retail accounts and loans. How you choose to use and repay these as well as meet your other financial obligations, such as rent or a cell phone contract, will determine your credit score.
This is one of the most important pieces of financial information about you. It determines whether people or companies are prepared to do business with you. Even prospective future employers can request to see your credit report.
Besides the obvious benefits of being able to qualify for loans, car finance and other credit facilities – a good credit score can also enable you to get better interest rates, because you are considered to be less of a risk than people who have a lower score.
By law, you are entitled to one free credit score report annually from any of the credit bureaus. Most people aren’t aware of their rights or don’t know where they can apply, so they never check their score. For the few who do, the free credit report can be difficult to understand.
Fortunately, there are other ways to check your credit rating that are free, simple to access and understand, and allow you to check as often as you like.
Having an understanding about what affects your credit score and the implications of this – such as access to financial services or better interest rates – gives you some control over your financial future. It also makes you less susceptible to believing conspiracies such as “blacklisting”. People don’t get “blacklisted”; low credit scores prevent them from qualifying for certain products and services.
In addition to learning more about the things that influence your score, such as paying your accounts on time and reasonably managing your debt, you can also pick up any sudden changes. These could be a mistake by the credit bureau or the result of fraudulent activity such as identity theft. Either way, picking up the problem early will allow you to respond quickly and protect your financial reputation.
Before you binge on your first pay cheque, take a moment to find out a bit about your credit score and how establishing a sound financial track record may benefit you in future.