Building Your Credit Score
It seems that nowadays credit has really gotten a bad name for itself. Nowadays, when we hear credit we automatically jump to the idea of credit cards and soaking up massive debt and interest because of it. For this reason many people avoid "credit" related products until it is essential. It's funny how many people don't realize what credit is and how it will affect you going forward. Specifically, credit is defined as the ability to obtain goods or services before payment based on the trust that you will pay back in the future. Credit can be as basic as putting that non-fat extra whip no foam soy caramel decaf mocha on your credit card or as complex as getting a loan for your business. Whatever the circumstances and wherever the loan agency - I can guarantee that your credit score and history will be looked at.
So let’s start with why its important?
When people ask me why they should worry about their credit score, I ask them if they worry about their report card or their resume. Of course you do! And why? Because for any graduate program, university degree, job or other venture - I can assure you these 2 variables will be scrutinized before any decisions is made. Your credit score is like your financial report card - its your financial identity and you want it to be the best it can be. Just like studying and getting internships is good being organized - YES being organized and not financially proficient will make it great. That's the beauty of the credit score - you don't need to know any financial jargon or knowledge of the stock market and investments.
If you didn't think your credit was important think again! When you go buy a home, apply for a loan, credit card or financing service your credit score is checked. You never want to end up in a situation where you did not qualify for a service because of your credit score. It's like saying you don't qualify for this program because you are missing this class - no one likes that!
So then what makes a good credit score?
When many people answer this question - their mind wanders to complex answers such as net worth, income, age, occupation and knowledge of money. In reality most of these factors are never there. Remember that credit is always based on your ability to pay back. This is where elements like paying your bill on time and not missing payments come into play. You do not even necessarily need to pay the full amount (although I suggest you do) for each bill payment just the minimum. Although paying back in full is the most desirable option because it keeps interest low and avoids carrying balances but it depends on your situation. Another thing credit bureaus look at is how long you have been able to manage and use credit. That is why it is a great idea from a young age to get a credit card and use it. Even charging 10$ a month and paying the bill in full is very helpful. Bureaus are not looking for people who transact millions on their cards or have multiple loans. They look for responsible people who have a tendency to respect the obligations of the loan.
The last thing I always like to point out is that your credit score is something that anyone can succeed it. It doesn’t take knowledge of financial jargon variables and the stock market – or a high income to supplement credit.
Start establishing your credit worthiness. Credit worthiness is that you pay your bills on time as long as you respect the minimum payment due even if it is 10$. It is your financial track record that will ultimately help when you apply loan for a business, mortgage, car and other services.
Disclaimer: All of the above information is my own personal opinion it is meant for educational purposes. Following all the advice does not guarantee a high credit score. The list is not comprehensive and is designed to capture the key points. Please consult with a licensed representative and do your research before applying for any service or making any financial decision.
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I am not being compensated for my relationship with LendGenius.