The modern economy runs increasingly on credit. A good credit score can open many doors to people, especially young people, who are looking to enter the middle class. Good credit is seen as a sign that you have your financials in order and is worthy of the trust of strangers.
But not everyone has a basic knowledge of credit, whether it be credit cards, credit scores or how it affects their lives. It is therefore wise for everyone, especially young people, to know about credit, its importance in our daily lives, and how best to get it to work in their favor.
Credit Cards for Beginners
A credit card is simply a card issued to the user from a bank that allows the user to use the bank's money to pay for certain purchases with the promise of repaying the bank at a later date, usually with interest. Qualifications are normally set by the bank.
Once you start using the credit card for purchases, you will start receiving monthly bills showing the minimum required payment to make. You have the option of making just the minimum payment, or paying an amount above that in order to bring your balance down faster.
There are many types of credit cards out there, especially credit cards for beginners and younger people, each with their own unique trait. There are some that give you a small cashback percentage on some or all of your purchases. Others offer a low introductory rate for a period of time that can be as low as zero.
These different types of credit cards are geared towards different demographic groups such as business owners or students, so it would be best if you checked which one suits you best. There are even ones that cater to international investors that offer flight miles when they use their credit card. A little research before getting a credit card is usually advised.
Credit Score for Beginners
A credit score is basically a measure of your credit worthiness. Nearly all lending companies will check your credit score to determine whether to approve a loan application, credit card application, or even a rental application in some cases. It is a good way of determining the character of someone you don't know personally.
A good credit score can be built by making payments towards your existing financial obligations on time. Over time, this will raise your credit score, and this information is very readily available to lending companies when assessing your creditworthiness. It is generally advised that you build up your credit score this way.
A good credit score opens up many opportunities for people. Generally speaking, the higher your credit score, the more trustworthy banks and lending companies see you, and the lower the rate of interest they will end up charging you. Many upscale rental compounds will require that your credit score reaches a certain threshold before continuing with your rental application.
Conversely, a bad credit score usually results in higher interest rates for you on things like mortgages, car loans, consumer loans and so on. Sometimes, it might mean the difference between being approved or not approved for a loan. In the long term, higher interest rates make it more difficult for you to live the lifestyle you want.
Credit for Young People
It is important that young people understand the nature of credit and personal finances as soon as possible. This is because the benefits of good credit and sound personal finances grow exponentially as we get older, so the more careful we are today, the better our lives will be tomorrow.
One thing young people can do to get a stable financial footing is to save a portion of their income and set it aside for retirement. This will not just ensure a more secure retirement, but it will also improve your balance sheet and therefore improve your credit score.
Another step young people can take is to set up a comprehensive debt repayment plan. This is very important in order to minimize the amount of money devoted to paying interest, which in turn means more money to build assets. Otherwise, many people will spend a lot of precious time and money servicing their debts.
The benefits of planning for the future and the consequences for not planning can be very steep. As such it is very wise to apply prudence to your financial life by learning about the ins and outs of credit and come up with a comprehensive plan to go about it.
Make Informed Decisions About Money!
As our level of technology continues, so does the opportunities to make good decisions as well as bad decisions. For every new technology that enables us to plan our finances for little to no cost, another online shopping tool pops up that makes it even easier to spend our hard-earned money on things that we don't necessarily need.
It is increasingly up to us as individuals to take responsibility for our life choices and take our future into our own hands by making informed decisions about what to do with our time and money. This will increase the chances of us having a better life than our parents did.
