If you’re trying to get your financial life off to a great start, you have to leave room for credit in your life. Unfortunately, today’s youth really don’t get the lessons in personal finance that they honestly need. This leads to a lot of stress and problems down the road. After all, if nobody has ever taught you about credit, how can you do anything but fear it? You might even have friends that are already getting themselves into debt. Vowing never to be one of them, you turn your back on credit. Sounds like a smart thing to do, right?
Well, not really. You see, lenders use your credit habits to determine whether or not you’re really ready to handle things like a car or a house. If you wanted to start a business later down the line, you will have a hard time getting a business loan. This doesn’t mean that it’s out of the question, merely that you’re going to have more trouble later on in life. You might have to pay higher interest rates, if you actually get approved at all.
So you have to leave room for credit early on. This doesn’t mean that you have to absolutely crazy with credit. Maybe you should start with a small credit card. This means that you will not have to spend big amounts to get noticed. You will, however, need to make absolutely sure that you’re paying your credit card on time each and every month. These situations are how people get behind and make big credit mistakes. They forget that they really do need to pay their bill on time. Just even being a day late can till reflect poorly on your overall credit report. You need to also make sure that you’re not spending more than what you can pay off. And we’re not just talking with your current salary. You need to be able to live on a reduced salary in the event that you got ill, or if you were made redundant. Redundancy isn’t something that anyone wants to deal with — it means that money will be tight until you find another job. However, you can indeed get things moving with just small payments here and there. You don’t want to always pay the minimum amount because that means that you’ll always be paying on that credit card. However, if things really get bad one month, you can take comfort in the fact that you can make a much smaller payment than normal because you kept your balance low.
Remember that your balances will grow over time. This isn’t a license to get completely wild yet. You will still need to practice smart credit principles. Don’t go on a shopping spree that you will not be able to pay off. Even though you can declare bankruptcy, the reality is that you can only do it every so often. So once you declare it, you’re not going to have that protection for several years. It can also do a pretty big number on your credit score, destroying it for a little while. You can rebuild your credit, but it can take you a while.
Don’t beat yourself up if you don’t know a lot about credit. There’s always time to learn something about it, so why not read into it a little more? You can look around our site, or you can search the whole Web. No matter which path you choose, you’ll find plenty of information on credit and personal finance, which is exactly the way it should be. Good luck!