People Under 30 Should Know About Credit: Need To Know
Credit is something very few people really understand, regardless of their age, and this statement is even truer for younger people. The tragedy here is that so many young people make financial mistakes in their 20s, and it doesn’t help that many credit card companies like to target young customers. These mistakes can then affect their entire life if they let things get out of hand. Let’s take a look at some things everyone should know about credit so you don’t make costly mistakes.
An advance credit card can be both a gift and a curse
Some people may advise you to avoid credit cards at all costs if you are young, but not so quickly. How will you build your credit if you don’t have a history? The truth is, the best thing for your credit is to have a few accounts open but to use them responsibly. This will show that you are active and generating income, but also that you can trust credit. That’s why you should consider getting at least one low limit credit card, but have a clear plan for using it. You can use it to pay your monthly bills and necessities and then set up an automatic payment system so that you can pay your card in full every month.
Don’t make too many requests
One thing you should avoid, however, would be signing up for too many offers at once. Applying too many credit in a short period of time is hopeless and will affect your credit. This goes for anything that will trigger a serious investigation of your credit report, so be careful.
The rate of use of credit is essential
One of the main factors used to calculate your credit score is your credit utilization rate. This is the ratio of the credit you are using to your total limit. The higher the ratio, the more it will negatively affect your credit. There is no hard and fast rule for this, but many advise only using about 30% of your total credit. Not only will this improve your credit score, but it will give you more room in case you need to make an emergency purchase.
This is also why it is not the best idea to close credit card accounts after paying them off. This is because withdrawing a card will increase your credit utilization rate. Instead, we suggest that you store it in a safe place while trying to keep the balance as low as possible on your other accounts.
Another reason why we don’t recommend closing your accounts is another major credit score factor: the age of the account. Closing a long standing account will reduce the average age of your accounts and negatively affect your credit, so think twice.
You have more than one credit score
Many people seem to think that there is a central credit score that all lending institutions look at, but there is not. Each credit reporting agency will have its own score, and these can be read very differently. While a certain score might look good with one agency, it will be bad with another, so you need to make sure you understand how each agency ranks people and what those rankings mean.
For example, someone with a score of 466 with Equifax will be considered to have an excellent credit score when it would be horrible by Experian’s standard. So, be sure to study each of these agencies and don’t be afraid to ask questions.
Check your credit reports often
Note that you are entitled to an annual copy of your credit report from the three major credit reporting agencies, so take advantage of that. This is because reports can often contain errors, which could seriously ruin your credit. In some cases, the accounts you settled may still be there. If you spot any irregularities, these agencies will make it easy for you to make changes. You will usually need to fill out a simple form and provide all the supporting documents you can.
No Credit Check Student Loans Still Can’t Affect Your Credit
There is a lot of misunderstanding when it comes to student loans and credit scores. Some people may think that because there was no credit check their student loan will not affect their credit. Do Student Loans Affect Credit Ratings? The reality is that it will depend on the type of loan you take out, not whether there was a credit check or not.
If you want more information on this, you should check out this article on student loans and your credit score by Tally. They present some of the most common student loan options and examine how they can affect your score. They also explain some of the effects of long term credit no credit check loans to help you determine if they are a good choice for you.
Bad credit is not forever
Everyone makes mistakes, and there’s a good chance you’ll make one or more with your credit. If you already have credit problems, don’t panic. There is a statute of limitations on how long entries can remain on your credit report. Bad entries will only stay on your report for 6 years in most parts of the country. From there, you can start working on fixing it.
Credit repair work
You may have assumed that there is nothing you can do to fix your credit, or that credit repair services are a scam, but you are wrong. Credit repair works, but you don’t necessarily need to work with professionals.
One of the easiest ways to improve your credit on your own is to recover a secure card. These will allow you to deposit a small amount of money that will serve as both a guarantee and a credit limit. You will then be able to generate positive financial activity and thus rebuild your credit. You should, however, make sure to use it with extreme caution.
We also suggest that you speak with some of the people you owe money to. You have to agree with them. Most of them will be open to negotiation and you would be surprised how willing they will be to reduce your debt if you agree to pay in a few lump sums.
All you have to do is get the written agreement that they will remove the entry from your credit report. This will ensure that you actually get credit benefits by doing this.
Your bank credit score is often more important
Another thing that many people ignore is that the relationship they have with their bank can be just as important as their credit rating, or even more so in some cases. If you are known to be a good customer, some banks will overlook certain flaws in your credit report and grant you loans. It pays to have a good relationship with a bank, so try to be loyal and treat them like gold.
These are all things every young person should know about credit. These tips could help you build a solid foundation that will help you throughout your life, so be sure to follow them exactly.