I’ve just got my first job, how can I build up a good credit profile before I buy a flat?

There’s no such thing as being too prepared – and it turns out that this rule doesn’t just apply to exams and job interviews. Keeping on top of your finances at the beginning of your career might just be the best thing you can do in your early twenties. Here, 23-year-old advertising assistant Emily asks Emma Maslin, money coach and mentor, whether her money management is good enough to help her to one day achieve the financial independence she wants.

I’m pretty lucky in comparison to my friends, as I’m living at home in London with my parents rent-free, which has been a lifesaver since I finished university (thanks, mum and dad). I work in advertising and my salary is far below that of my friends who went on to join big corporate grad schemes. I earn £21,000, which would probably get me a small bedsit in the very dodgiest part of London. Of course I’d love a place of my own, but for now I’m going to have to be patient.

I worked really hard to get my job as an advertising assistant. I interned for free just about everywhere (I’m a total pro at carrying seven Pret oat milk lattes at any given time). So when I got offered a full-time position seven months ago, I was ecstatic.

I’ve just passed my probation and I’m now starting to relax a bit more about money – it’s still a novelty seeing my bank balance without a minus sign next to it. I’ve been able to pay off my overdraft and my student loan has started coming out too.

As I have more of a disposable income than my friends who are renting, I’m making the most of it while I am still living at home. I love eating out and splurging on the odd luxury without feeling bad about it. After all, my job requires me to attend a lot of events, so smart co-ords and a good pair of heels are workwear essentials for me. I remember buying a Wandler bag with my first paycheque. I was proud to be able to finally have something elegant for work that I had paid for myself, my student wardrobe wasn’t really cutting it anymore.

I’m sensible though and I always keep an eye on my spending. Every month I put away 25% of my pay cheque into a separate savings account. I’m single and I don’t want to rely on meeting someone to get on to the property ladder so by saving now, I hope I’ll have enough for a deposit of my own eventually.

I’m conscious of being financially independent and I think getting into good habits early is key. I don’t have a credit card as I am worried about using it needlessly on a night out and getting into debt over interest charges. I did read somewhere that it’s good to start building up a credit score for a few years before you want a mortgage, but I’m not sure where to start.

Emma Maslin, money coach and mentor, says…

In today’s social media orientated world, we are conditioned to buy material things and experiences to keep up, even when we haven’t got the money. Don’t fall into the trap of buying mindlessly using a credit card, just because they are available. Borrowed money always needs to be paid back – on time and with interest. The worry that comes with owing money is rarely worth the momentary happiness that buying the latest trainers will bring. Being disciplined to save for your wants is a great life skill.

When it comes to those things you want to do, experience or own in life, developing a ‘spending and saving plan’ is essential. It’s easy to focus on your short-term wants – new clothes, nights out with friends, the latest phone. Take some time to think about your future goals: next month, next year and beyond. These may include starting a family or buying your own home.

To build your spending and saving plan, allocate a portion of your total income to each of your various goals, then your essential expenses (like rent, utilities, repayments), then non-essential, fun spending, until every pound of income has been used. Do this and you are being intentional with every pound that goes out of your account, making sure you are chipping away at all of your life goals, rather than just living for the moment.

Most online banks have a facility where you can set your goals and save into a nominated ‘pot’ for them. Be aware that planning to save whatever you have left at the end of the month doesn’t work; make sure you transfer the money into your pots on payday before you have a chance to spend it.

For your living expenses, apps such as Emma and new banks such as Starling and Monzo allow you to set a budget by category of expenditure. They will alert you when your total spending is nearing the amount you have allocated for that category. Using these is a great way to keep accountable to your spending plan.

If you decide to take out a credit card, make sure you are able to keep up with at least the minimum repayments before you apply for it. If you fail to make these on time, it will be noted on your credit report. Don’t miss a repayment because the impact on your credit score could cause you problems for years. When you come to do various things in life – like take out a new phone contract, purchase car insurance, rent a house or eventually buy your own home – your credit score will be checked by the company you are engaging with. If you have a poor credit score, you may have to pay a higher interest rate as you are seen as a more risky customer, or you may be refused altogether.

To build a healthy credit score, you need to show you are responsible with borrowed money. Start with just one credit card and show the lender you can use it responsibly; don’t spend close to your credit limit, and pay the balance off in full each month.

Emma Maslin is a certified money coach and founder of award-winning personal finance website, The Money Whisperer.

New to the UK, Laybuy is a buy now, pay later payment model that’s completely interest-free so no nasty, surprising extra costs. It gives smart and savvy shoppers the chance to buy a product upfront and repay in six easy weekly interest-free payments. A safe and easy alternative to credit cards for spreading the costs of aspirational purchases, opening a free Laybuy account also helps users build a positive credit rating. Download the Laybuy app from the App Store or Google Play.


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