Contributed article in our financial series. Enjoy! – Kimberly
Finances are a crucial part of a person’s life if he wants to be successful. One of the best ways to secure your finances is to practice good habits while you are still young. You may possibly now know how essential it is to live within your means and save money for the things that you want but the concept of building a good credit at a young age might still be not on your mind.
Nevertheless, building your credit score early is an important factor in achieving financial success. Here are some reasons why you have to establish good credit while you are still young:
Can Qualify for Future Loans
While you are still young, you might think that you can live completely free from debt. But this might not be possible if you are going to avail of huge purchases such as buying your own home someday or financing your own business. Most adults can’t even reach cash savings that amount to $100,000 in such a short time. For some, it might also be impossible to purchase their own car without availing a loan.
The first thing a lending company will check before approving a loan is assess your credit. They do this because your credit history will show how you have managed your debts and finances in the past. Then they measure the probability of how you are able to repay them. If you have no credit score, then they can’t have a basis of loaning you any money.
Repay Lesser for Loans
Even if you are qualified for a loan with a poor credit score, you will be asked to pay it with a high interest rate. If a lender tags you as a person with high credit risk, lenders might still give you the benefit of the doubt but will only trust you so far. To lighten the risks, they will most probably resort to giving you higher interest rates.
But if you have a good credit score, the interest fee you will be asked to pay will be significantly lower. A person with a high credit score can be granted a loan with an interest rate a lot lower compared to someone with a poor credit score. Excellent financial habits can provide you thousands worth of savings even over a loan term. If you avail a mortgage, your savings can reach to hundreds of dollars.
Save on Other Services
Having a good credit score will also help you in several other ways. In some states, insurance companies also assess your credit history when they set your premiums. If a person has bad credit, the individual can be asked to pay more for his monthly insurance. For some telecommunications and city services providers, they might also require to check the status of your credit score before approving you to use their services without a security deposit. Some homeowners and landlords also ask you to pay high security deposits if you have bad credit history.
Help You Get a Job
Your potential employers are not required to look at your credit history but they can take a peek at your credit report. Not all employers will require having your credit report checked, but some will still assess it as a part of your background check before getting hired. If you are applying for a job that requires handling private information or large funds, some details on your credit history might raise red flags to your potential employer. Your potential employer might doubt you will be easily bribed or perhaps run away with their money if you are currently having money problems.
So while you are still young never regard good credit as unimportant because you might be turning your back on possible financial opportunities that will help you achieve financial success.by