How to start building a credit record

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Anyone who longs for the days of being in their 20s and early 30s is forgetting one key factor: you were probably broke beyond hope. These years are filled with all sorts of start-up expenses, like your first car, your first apartment, or your first sofa (which costs way more than anyone ever prepared you for) – all of which comes out of your entry-level salary that barely covers your lunch bill.

But, somewhere amid the flurry of overdue accounts and empty food cupboards, you still need to find room in your budget for building that all-important credit score so that you can qualify for a home loan by the time you’re able to afford it.

Acknowledging the financial struggle many young working professionals face in this regard, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, suggests that they take the pressure off themselves by adopting a long-term view on improving their credit score. “Building a good credit score does not happen overnight. Certain stages of your life might require you to live off more credit than others – and that’s entirely okay provided you are able to keep up with the minimal repayments on your various sources of debt. Over time, certain debts, such as student and car loans, will be paid off, freeing up some money to lower other debts and improve your credit score,” Goslett advises.

For those who have reached the stage of being serious about building a good credit score, it is advisable to have three lines of credit; any more and financial institutions might think you’re over-extending yourself; any less and your credit history will be considered too thin. “Young professionals should keep this in mind when they are nearing the stage of applying for a home loan. Most credit checks will take the last six months of credit activity into account, so it is advisable to bring your debts down at least six months before approaching any financial institutions,” Goslett suggests.

Lastly, having an active savings account will contribute towards achieving a higher credit score. “Once you’ve lowered your debts, you should then start building up a savings account. Not only will this help you achieve a lower interest rate on your home loan, but it might also come in handy to cover the various unexpected costs involved in purchasing your first property, such as transfer duties and registrations costs.”

“Especially if you are a first-time buyer, I would recommend that you arrange to meet with an experienced real estate advisor who can prepare you for all of the realities involved in purchasing property. Most importantly, they can provide insight into what homes with your given search criteria cost and how long it might take to find a home like this, providing you with a rough timeline around which to organise your finances,” Goslett concludes.


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