Three Reasons To Start Working on your Credit Rating When You're Young
Your FICO credit score is crucial to being able to gain access to good loan and borrowing rates from lenders. So setting wise credit habits whilst you are young, will make life just a little bit easier as you grow older. Here are three very good reasons why you should start working on your credit profile as soon as you can.
1. A good credit score will help you get off to a faster start in life
Establishing a strong credit profile means more than having a credit card to make purchases with. Though some wait until graduating college, a positive credit profile built beforehand is crucial for full independence.
It's true that it can be considered by employers and apartment applications. And it’s essential for buying a car and getting good insurance rates.
Without strengthening your credit ahead of time, becoming an adult will be more difficult and potentially more expensive.
2. Establishing credit in your name will help you build a good track record
Without a history of credit under your name, companies may hesitate in accepting your applications. If this is the case, a parent can add you to their account as an authorized user or joint account holder. This method is recognized by the credit reporting agencies and is a simple way to start building credit against your name.
It’s also a great way to learn the credit process and understand the responsibilities it involves. Another option is applying for a secured credit card. With a secured credit card, you make deposits to supply your own credit line.
If managed with accountability, the lender might let you switch to a traditional account.
3. Getting approved for a credit card account can actually be easier when you are young
The accounts companies offer you are usually based on pre-screened applications. They’ve already estimated how much risk you pose to their business. So without any credit history, you’re options might not be optimal. The good news, however, is that college students are regarded as ideal customers.
But be warned: don’t get carried away with the many enticing offers. You should be selective, weighing the pros and cons of each account. And once you begin using your credit card(s), don’t let yourself spend more than you can afford. If you haven't established a credit profile when you are young, it starts to get that more difficult as the years pass.
With responsibility and patience, starting your credit profile and history early will strengthen your path to independent living. For more information on FICO credit scores, click here.