Paul McIndoe is an online, freelance financial journalist. He lives in Edinburgh with his two dogs.
Most people at some point in their lives dream of having something or doing something that may seem just a little bit out of their grasp; be that a shopping trip to New York, a new patio or a luxury spa treatment. However, the one thing that each of these have in common is the need for money in order to fulfil them.
It may be enough to work longer hours or stash away some cash every month and save for that dream, but this isn’t always an option. If, for example, a car is needed to get to that new job, it will be necessary to find the money as a priority. And coupled with the “live for today” attitude that is prevalent in modern society, many people will need instant access to cash that they may not have in savings.
When applying for any sort of credit, be it a loan or a credit card, companies will always consider the application based on the individual’s credit history. This helps them to establish how reliable they are and how likely the person is to default on repayments.
It may surprise some, but having no credit history can be almost as bad as having a poor credit history. That is to say, if somebody has been prudent enough to have never had any loans or credit cards in the past, this will limit their current borrowing options. So if there is a possibility of requiring credit some time in the future, it’s worth remembering this and taking steps to rectify it.
To build a credit rating, an individual can apply for a credit card through the same bank their current account is held with. The interest rates with bank credit cards may not be the most competitive, but if the balance is paid off at the end of each month, this needn’t be a problem.
Similarly, an individual’s borrowing options will undoubtedly be limited with a poor credit rating, but depending on the individual circumstances, there should be something available. There are even “bad credit” personal loans and credit cards specifically aimed at people with a poor credit history. It’s also possible to compare loans that are aimed at people with an adverse credit history online, ensuring the best rate for the individual.
Many prudent people have never had to borrow money, effectively meaning they have zero credit history. However, there are ways to build a good credit rating to maximise borrowing options for those rainy days. As the saying goes, “you never know what the future holds”, and there may be any number of reasons that will require a substantial sum of money at short notice. So, it’s best to be prepared.
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