Credit Guidelines for Gen-Z

Credit Guidelines for Gen-Z

Gen-Z have arrived! If you were born after 1995 then as a Gen-Z it’s time to understand credit files, so it’s time to read 1Plus1’s credit guidelines for Gen-Z.

Here at 1Plus1 we want to remove some misconceptions regarding credit files.

Paying attention to your credit file now could do you good later on - just like eating your greens.

What your credit file does

Look to the future. Do you see a nice house and shiny car in the drive and a great job funding it?

Time to start thinking about your credit score, which will impact these opportunities:

• Car finance - if you want a brand-new car on monthly payments, it’s likely you won’t get a good deal if your credit score isn’t good.
• Rental agreements - landlords probably won’t want a tenant that doesn’t have a good record of paying their bills.
• Job applications – lots of employers will run a credit check before hiring you, especially if the role involves dealing with money.
• Buying a house – even if you’re not close to considering mortgages yet; the decisions made now could have huge consequences later on.

Basically, your credit score is a big deal. Having a good credit score means getting the best deals and rates. The sooner you start paying attention, the better position you’ll be in for the future.

So, how do credit scores actually work, you ask?

Credit reference agencies record a person’s financial information in one place. This is your credit file. That information gets condensed together and comes out as a credit score.

A high score is good and means lenders will trust you. A low credit score isn’t and means you could find applications for credit will be declined. Your credit score is a way for lenders and banks to instantly judge you without ever having to speak to you in person.

Lenders and banks predict peoples’ future behaviour based on how they’ve acted in the past. Not paid back a previous loan? They’ll be unlikely to trust you again.

Do we all have a credit score?

Pretty much!

If you’ve a bank account, mobile phone contract, just a utility bill in your name, you’ll probably have a credit file where it’s recorded. And if you’ve a credit file, you’ll have a credit score. Even if it’s only based on a bank account you opened at 16.

If you’ve a thin credit history

Lenders use your credit score to predict your future behaviour. But, if there isn’t much information on credit file, your credit score isn’t really giving them much insight. So, a strong history of credit on your file is just as important as your actual score. Particularly important if you’re just starting out without a lot of credit history.

How to give your credit score a boost:

• Open and manage a bank account - if you haven’t already, this is the best place to begin. Keep a positive balance and don’t go overdrawn.
• Apply for an overdraft - your bank may give you a modest interest-free overdraft that can be helpful if you ever need short-term credit. If you use it, make sure to pay it off in full before the interest-free period ends, or you could end up paying charges.
• Don’t miss any payments - whether it’s for your phone contract or any bills, missed payments can leave negative marks.
• Get on the electoral register - easy but important. Register to vote on the government website.

Checking your own credit score

There are three main credit reference agencies in the UK: Experian, TransUnion, and Equifax, who take your data and give you a credit score.

Each use their own scoring system. The number you get from each one will be different. If you’d like check your credit file, there are sites such as Credit Karma, ClearScore and Experian where you can sign up for a free account and check your credit report any time you like.