Introduction: Starting early adds up big time

Unfortunately the younger we are the harder it is for us to have the foresight to invest in the long game and make sound choices for our future. This is not a matter of intellect but rather of experience. Our priorities are rather vague before we are forced to reevaluate the gravitas of our choices by necessity and it takes a great deal of maturity for us to thrust ourselves early in the arena. As a great many of students can attest to, we often wish we “did things differently”.

Our biggest weakness is usually our lack of knowledge. You searched for this article and that is a good sign. You want to learn and you can learn. We will show you not only how important it is to achieve a good 700 plus credit score, but how exactly to get it. After you are done reading, in a few short minutes, you will have a significant competitive advantage over your peers and you will be one step closer to funding your education and realizing you dreams.

Credit Score

Why is it vital to have a good credit score

A good credit score is no arbitrary number. It reflects how financially responsible you are: Everyone, all the way from large, financial institution like banks to your employers or even your landlords will have a thorough look at it. To give you an analogy, having a bad credit score is akin to going to a party under dressed: You will make a bad impression, make no mistake about it. In many cases, it can even close doors to opportunities for you. Your loan requests might be denied altogether. Even if they do get the green light, however, you will end up paying more as your lenders will likely put a much higher interest rate on your loan.

In other words, having a low credit score hurts your credibility. People making monetary transactions with you will trust you much less in that they will get their money back and thus will do everything in their hands to ensure they do. If they agree to make transactions with you in the first place. We hope you are beginning to understand how important that number is for your future.

What makes up your credit score

Your three-digit number is generated by a mathematical algorithm using information in your credit report, and ranges from 300 all the way up to 850. It is comprised of five, major data categories:

  • Payment History – 35%: Whether or not you pay your bills and debts on time.
  • Amounts Owed – 30%:  Total amount of debt you have. The more you owe, the less your credit score.
  • Length of credit history – 15%: The lengthier your credit history, the higher your score.
  • Types of credit used – 10%: The mix of accounts you have.
  • New credit: Your pursuit of new credit. Includes credit inquiries and number of recently opened accounts.

Steps to raise your credit score

  • The simplest trick you can employ is convincing your parents to add you as an authorized user on their own credit cards – so long as they have a healthy score themselves. Your credit score will get an early boost, from the history your parents have on their cards. The benefit doubles considering how you are likely to pick up good habits by observing how they handle their cards.
  • The second and perhaps most important step is that you get a first hand experience with a credit card. A word of caution: This is no excuse for you to spend money on things you do not need. The soundest financial advice you can probably get is to live on less than you earn. Having a credit card is a big responsibility and you should only try it if you think you have a strong sense of responsibility. Focus on making small purchases and make sure you can afford to pay off the balance with no fail. Most importantly: Do pay off your credit cards each month in full.
  • Thirdly, always pay your other bills on time. Even though this will have less of an impact on your credit score it is of no less importance. You need to get in the habit of handling money quick and become adept on it quickly. A great source of financial problems derives from the reality that the majority of people suffer from financial illiteracy. Set reminders in your calendar or even register for automatic payments if you struggle to remember due dates.

Practices to avoid

  • Understand credit utilization ratio: How much of your allowed credit card limit you are utilising each month. The higher your ratio is, the more your credit score will suffer. Charging your card a higher balance is okay, if done sparingly, but you should always aim to keep it as low as 30% if you are really trying to improve your score. In other words, if you are allowed $1000 a month, use no more than $300.
  • Never play around with your accounts. Take time to research each credit card and avoid jumping around opening new accounts for no good reason. Closing an old account shortens your credit history which hurts your score. Moreover, applying for multiple accounts at once likewise lowers it: New credit inquiries make up 10% of your score.
  • Not having a game plan in dealing with debt: We will introduce you to debt handling strategy, but you would be well advised to research the topic more yourself. Debt snowball is a really simple concept: You write down your debts, smallest to largest, and you pay off the minimum payment on all your debts except for the smallest one, which you try to get out of the picture as fast as your skills, creative intelligence and means allow you. After it has been dealt with, you repeat the process by now focusing on the next, smallest debt left.