Starting your first job comes with plenty to think about, from performing well in a new and unfamiliar environment to handling the complexities of the tasks you’re assigned. It’s no surprise that your credit score may be the last thing on your mind.
By the time your salary lands in your bank account, you’re probably more concerned with paying the rent, buying essentials, getting some new clothes, celebrating making it through the month or working out how soon you can buy a car.
Gavyn Letley, Product Head at specialist loans provider at DirectAxis, says what you do with your first salary is important, as the spending habits you develop from the outset can have long-term implications for your financial future.
“Usually, your financial track record begins when you start earning a regular income. This will open doors to financial products, including credit cards, retail accounts and loans. How you choose to use and repay these, as well as meet your other financial obligations, such as rent or a cell phone contract, will determine your credit score.
“It’s one of the most important pieces of financial information about you. It determines whether people or companies are prepared to do business with you. Even prospective future employers can request to see your credit report.”
He adds that a good first step to controlling your finances and managing your credit score is to set a budget. This will allow you to keep track of your income and expenses, reduce unnecessary expenditure and create room for savings.
By managing your money well, you’ll be able to start building a good credit score. Beyond qualifying for loans, car finance and other credit facilities, a good credit score can also allow you to get better interest rates, since lenders see you as less of a risk than those with lower scores.
By law, you are entitled to one free credit score report annually from any of the credit bureaus. Yet many people aren’t aware of this right or don’t know where they can apply, so they never check their score. For the few who do, the free credit report can be difficult to understand.
To help customers navigate this, several platforms now offer free, simple-to-access tools to check your credit rating as often as you like.
In addition to allowing you to check your credit profile, these platforms also provide simple explanations about what is influencing your rating and how to improve it.
“Having an understanding of what affects your credit score gives you more control over your financial future. It also helps dispel common misconceptions like so-called ‘blacklisting’. People don’t get ‘blacklisted,’ instead, low credit scores prevent them from qualifying for certain products and services,” explains Letley.
Contrary to what some people think, checking your credit rating using a third-party tool doesn’t affect your score at the credit bureaus.
In fact, besides learning more about the things that influence your score, such as paying your accounts on time and reasonably managing your debt, you can pick up on any sudden changes. These may be a mistake by the credit bureau or the result of fraudulent activity such as identity theft, where people open accounts or take out loans using your name and ID number. Either way, picking up the problem early will allow you to respond quickly and protect your financial reputation.
“Before you binge on your first pay cheque, take a moment to find out a bit about your credit score and how establishing a sound financial track record may benefit you in future.”
