I’m 19 and Have Already Blown My Credit Rating

Dear Scott,

I am 19 years old. When I turned 18, I applied for multiple loans, not knowing that doing so would affect my future. I have recently tried to get a phone plan through Optus in my own name but they rejected me because of my history. Now I am starting to save for a home loan. I have checked my credit rating on Credit Savvy and it’s 631, and I want to bring it up to the highest it can be. But how do I do this? I have been googling for days but nothing useful has come up.

Eryn

Hi Eryn,

True story: when I was 18 years old, my mates and I thought it would be a fun idea to buy a bottle of Jim Beam and mix it with home-brand cola. And then …

Bingo, bango!

I don’t remember much about the night, though I do remember the next morning … violently.

Here’s the killer: since that day I’ve never drunk bourbon (or any spirit for that matter).

Yes, that’s right: all these years later, and I still can’t bring myself to do it.

Which is actually not a bad outcome!

Eryn, that’s how I’d frame your bad credit rating: you messed up when you were still a teenager (like we all do). However, you’ve shown me that you’ve learnt from it. Seriously, how many 19-year-olds are saving for a house deposit, and writing to the Barefoot Investor?!

Think of it as a good thing — you got it out of your system early.

So here’s my advice: aggressively pay down your debts, and then commit to saving for a deposit. Don’t worry about your credit score; it’s a vanity marketing metric from credit agencies, not banks, and therefore about as important as your Uber passenger rating.

What really matters to a lender is having a history of savings and a clean credit report. And there’s the rub … there are things you do as a teenager that stick with you for life … like, say, getting a tattoo. However, a bad credit report will legally drop off in five to seven years, which coincidentally will be about the time you’ll be hunting for your first home.

Bottoms up!

Scott.