19 Jun Why Young People Should Start Building Their Credit Profile
Having a good credit rating has always been important, but in current times it is more important than ever. This is why young people should start building their credit profile now. Young people want to have fun and live a worry free life, but building a good credit score now, and keeping it high will pay great dividends in the future. Let us look at some of the reasons young people, and all people for that matter, must have a high credit score.
The first reason is that you will be able to borrow money when you need it at a lower interest rate. In the past everyone paid basically the same interest rate no matter what their credit score. If you qualified for the loan, you paid the same interest rate as anyone else. Today, lending institutions charge higher interest rates to those with a low credit score. Having a high credit score will save you from paying a lot of money in interest. This is especially important when you make large purchases such as cars or homes. Since it takes time to build a good credit score you must start working on your score while you are young.
The next reason young people need to start building their credit profile now is work. This is something many people do not even think about. If you have a low credit score you could be passed over for a job or a promotion. Employers now take credit ratings into account when they hire an applicant or when they give promotions. Many people do not believe that this is necessarily fair, they believe that just because they have poor credit does not make them a poor employee. This could be true, but in the modern world it is a fact of getting a job that many employers use credit ratings in their decision making process.
Later in life, if you want to make large purchases such as sports cars, boats, or homes you must have a good credit score. For instance, to qualify for a home loan you must have a credit score of at least 600, as of today. With a score of 600 you will get the loan, but you will pay the highest interest. The same rule applies to purchasing anything with credit. For these reasons young people need to start building their credit profile as soon as they turn 18 and can have their own credit card.
Many people believe that building a good credit score is difficult. In actuality it is not hard at all, you just need to use some restraint and common sense when using credit. The easiest way to build your credit score fast is to get one credit card when you turn 18. Use the card for all of your daily living expenses, making sure you do not spend more than you make, then at the end of the month pay the full balance due. This way you are building your credit rating and yet not paying any interest. Check your credit score at least once a year, and if you use restraint, common sense, and your credit card you will see your credit score rising rapidly.