Credit Essentials

Credit is important.  There are many discrepancies about credit.  Some people live by it and others stay clear of it, but you cannot run from it.  There are certain advantages that come from establishing and maintaining strong credit, and there are also things that everyone should be cautious about in regards to credit.  Here are a few helpful tips!

  1. Get to know the basics.

If you attended the Financial Flight Plan workshop on credit management, this may be a refresher, but let’s review! Credit relates to a wide variety of things; such as large purchases, renting an apartment, or qualifying for a loan.  Credit is not out of reach for anyone, but it is important to get familiar with the key concepts such as the interest rates and budgeting for monthly payments.  When beginning to establish credit, it may be difficult to find a credit card with a low interest rate, so it is important to make all payments on time.  Interest will only apply for late payments; make sure you are aware of the interest rate and paying your bill on time.  Budgeting for monthly payments is all about strategy. Think of expenses that are fixed or consistent. For example, a phone bill, an electricity bill, gas, and groceries. If the expense is something that rarely changes, this means you are able to create a stronger budget ensuring that you will be able to pay off your credit card bill at full. This helps you avoid interest fees and, more importantly, build your credit!

2. Why is it important to build credit?

What is next on your financial goal list? Could it be buying a new car? Moving into a new apartment? Buying a house? All of these things require credit! Building your credit shows off your financial responsibility – it is important. Building credit gets you even closer to achieving your financial goals and helps you become financially literate.

3. What is a credit score?

Sometimes thinking about a credit score can be overwhelming, but a high credit score is obtainable if you do what it takes. A credit score is simply a statistical number that depicts a person’s ability to repay a loan and, again, overall financial responsibility.  There are over 26 million Americans who have no credit history. Additionally, 10 million of the 26 million who have no credit are under the age of 25 years old. Though credit may be viewed as debt, you have to start somewhere, and when you do make sure you start smart.

Written by: Brianna Hayes