Do you need to get credit to get a good credit score? Nonsense.

There is still a myth out there that you need to apply for a loan or a credit card so you get a ‘good credit file’. If you never apply for credit; your credit file is non-existent and thus perfect. You can only go worse from there. Enquiring into credit (regardless if you take it or not) will lower your credit score. If you enquire a lot in a short period of time you can destroy your chance of getting a bank loan for a house, even if you don’t take any of the loans or miss a single payment. Even moving house a lot lowers your credit score; I assume because the banks considers you more of a risk.

Your credit file shows enquiries into credit, including things like phone plans, car loans, personal loans, credit cards. It also shows defaults, paid or unpaid, and current loans as well as other files linked to yours (like your partners’). Defaults are generally a showstopper for your home loan application (Keystart will look at you if you have one, provided it’s been paid over a year ago, banks will decline immediately, paid or not). And for the Kiwi’s living here: the banks here will check your file in NZ; so the slate is not wiped clean I’m afraid! Contact me if you want to get your NZ file checked out.

It is not easy to get anything removed from your credit file, fair or not. You could have a default on there from 4 years ago after you never got a bill from your phone company because you moved house. Even if you would pay it now, the company needs to actively get it removed. There are people that made it their job to get things removed from credit files, I work with a guy that’s amazingly effective at it. You only pay him if he’s successful. It’s not cheap, almost a thousand bucks, but if it’s your only way to remove this roadblock on your way to home ownership it’s well worth it. Most remarks come off after 7 years, but waiting even one year will cost you a lot more in lost growth and price rises then the grant removing it now cost you. Just don’t go applying for credit cards because your Uncle still thinks you need to get ‘a good credit score’. Just smile and nod.

If you want to find out what your credit file looks like: contact me and I’ll get you yours.