
17 Apr My Experience Building Credit as a Beginner
When I got my first adult job, I discovered credit. This three-digit number dictates your financial standing– whether you can rent an apartment, how high of a loan you can get, and whether you can finance a car. As a newly minted Young Adult, I decided I needed to build my credit score to reach my financial goals: renting an apartment and buying a car. I checked my credit with Credit Boost’s free credit checker. To my shock and horror, my score was a lowly 580. 580 means you’re a “potential high risk”.
It was time to build my credit. Read on to discover the secrets to building your credit as a beginner– because anyone can.
Credit Builder Account
First, I scratched around Google for credit builder accounts. FNB had one called the Aspire Credit Card, and all I needed to qualify was to earn at least R60,000 annually. Luckily, I earned more than that, and so I decided to enquire. My boss told me that he uses his credit card to pay for everything, and then pays it back at the end of the month. So, I decided I would do the same.
Utilisation Ratio
That first month, I contributed to groceries while living with my parents (around R2000) and paid it back at the end of the month. My credit limit was R10,000 and I had only used 20% of my credit, which meant I had a low credit utilisation ratio, which also builds credit. Did you know? The ideal credit utilisation ratio is considered between 20% and 30%.
I did this for about 2 months, then checked my credit again…620!
Paying bills
With my new and improved credit score, it was time to start applying for rentals! This was exciting for me because it would be my own space. I submitted about 5 applications with my ID, proof of address, payslip, and 3 months bank statements. I got approved for 3 of them and paid my R10,000 deposit for my favourite of the 3.
It was time to move in! I used my credit card to buy a mattress, sheets, cutlery and crockery. My roommate and I slept on the floor for the first month, but it was okay. The apartment was ours.
From paying my utility bills, cellphone contract, and health insurance on time, along with paying the credit card payments on time (really important for building credit), my credit score skyrocketed after a few months! I did another free check to monitor my credit.
Now, I check my credit report every few months, just to check how it’s doing. I’ve also taken out a motor loan (and insured the car with Credit Boost) because I discovered having diverse lines of credit is important.
In summary, to build my credit I:
- Got a credit builder card and made small purchases.
- Paid on time.
- Maintained a low credit utilisation ratio.
- Diversified my lines of credit.
If you have any other questions, have a look at another one of our articles, Factors Impacting Your Credit, or contact Credit Boost. We’re happy to help.