Having bad credit can feel like a major hurdle to overcome when you start thinking about investing. Some might think it is impossible to invest while dealing with bad credit, but this is not the case. It is, however, important to consider if investing now is the smartest choice. If you have significant debt, it may be beneficial to wait and invest after you’ve paid this down to a more manageable level.
Fortunately, you can start investing with however much money you currently have spare. It is essential to be cautious with your investments and never put more than you can afford to lose into any single investment. It is also a good idea to observe the markets, learning to analyse the changes to the markets and how they can impact your investments.
Invest Little And Often
A good way to start investing is by regularly doing so in small amounts. You don’t need a massive fund to work with to get you started. Starting small means that you can invest in a wider range of stocks and shares, giving you time to get accustomed to how stocks and investing work. It will also make you less vulnerable to the fluctuations in the market, keeping your money safer.
Open A High-Interest Savings Account
One of the simplest ways to start investing is through a savings account. This is a risk-free way to invest that many people are familiar with. To get the most out of this option, you should look for a savings account with the highest possible interest rate. The higher the interest rate, the more you’ll get back from the money you deposit.
If you haven’t got much experience managing a savings account, it can be beneficial to start small. Consider putting £10 into your account each week, or more if you are able. Over the course of a year, this will add up to £520. It can also help to automate your savings, setting up a standing order to ensure the money is paid into your savings account without you having to lift a finger.
Pay Down Your Debt
If you have a large amount of debt, it is best to pay this down before you start investing, particularly if you plan to invest large amounts. People have bad credit for various reasons, and debt can be a significant factor. Consider making a list of the debts you have in order of the interest rates you’re being charged for them. Ensure that you start by paying off the debt with the highest interest rate.
It may help to look at ways to consolidate your debt if you have debt in a lot of places. This can cut down on the admin required to keep track of your debts and make payments simpler to manage. There are plenty of ways to consolidate debt, such as loans or credit cards. It is vital to ensure that whatever option you use gives you better terms than the original debt.
Work On Improving Your Credit Score
As mentioned previously, it is possible to invest while dealing with poor credit, but it may be easier for you to start by boosting your credit score. A strong credit score opens up the possibility of various investment opportunities. You can improve your credit score by paying your bills and other financial commitments on time, ensuring you’re registered to vote in your current residence and keeping your credit utilisation low.
Start With A Strong Emergency Fund
If you don’t already have an emergency fund, this can be an invaluable tool for your investment journey, giving you peace of mind as you manage the risks and rewards of investing. A good emergency fund should be between three and six months of your typical monthly income. This can also be another great way to improve your credit, as having a financial cushion like this can ensure you’ll never miss a payment.
Get On The Property Ladder
If you have bad credit, you might think that buying a home is out of your reach for now, but this is not actually the case. There are mortgage lenders for people with a low credit score, which can be ideal for anyone wanting to invest in property. You should always think carefully before investing in property, as it is a long-term commitment.
It is a good idea to find a broker that specialises in mortgages for those with poor credit. They will be able to assess your financial situation and match you with the best possible mortgage lender. It is important to be upfront about your financial situation to get the best advice. Consider specialists like the experts at MoneyNest to help you find your ideal match.
Invest In Fine Art
Art is another excellent investment opportunity that is open to anyone. The price tags can be high for fine art, but it is an investment that can see excellent yields. An excellent place to start would be in local art galleries. Spend some time looking at artwork before investing, learning more about the artist and their prospects. Look for artists that are up and coming and making a buzz in the art world.
Start Building A Wine Collection
Wine is another investment option that can be enjoyable as well as profitable. You’ll need to learn more about wines, vineyards and what makes a wine valuable to succeed in this area of investment. You’ll also need a suitable place to store the wine, which can be costly. You can get wine fridges installed that can suit a range of budgets or use a basement or cellar if you have one.
Look For A Robo-Advisor
Robo-advisors are great options for new investors, as they take a lot of the guesswork out of investment. A Robo-advisor is a software that uses the information you give it to work out the best options for investment. It will also manage your investments for you, rebalancing them in automatically in response to changes in the markets.
There are many Robo-advisor options out there, and it is crucial to look for one that suits your needs. It is also essential to factor in cost, as many Robo-advisors will take a set percentage of the money you make through investing. This can quickly add up if you end up making a lot of money, but many people find the ease of use to be worth the cost.
Plan For Retirement
Planning for retirement is critical if you want to retire comfortably. It is best to start your retirement plans early to ensure that you have enough time to get things done. It will also be less of a stress on your finances to save up steadily over time. You should learn about the pension options available and ensure you take full advantage of your employer’s workplace pension scheme.
Buy Collectables
Collectables can be a fantastic option to invest in, as they often grow in value over time. There are many options out there, and you’ll need to do your homework to learn which collectables will grow most in value. Things like comic books, Lego, trading cards, stamps and film memorabilia can all be great options. You’ll also need to know where to look to find suitable opportunities and hidden gems.
