Quite a large number of youngsters are keen to get financially savvy these days. In fact, we are constantly inundated with advice requests from people as young as fourteen that are eager to find out the best ways of earning a bit of pocket money or finding the next niche that could see them earning a plentiful sum before they start college or university.
We always try to do blogs that point people in the right direction with regards money-making and saving, but today we thought we’d highlight the importance of not only making money, but building a solid credit rating whereby people are financially viable ‘on paper’ from a young age.
Quite a lot of people, especially the younger generation, fail to realise the importance of building a credit score; in fact, many of today’s millennials fail to understand what a credit score actually is.
A credit score is basically a score that reflects how much of a financial risk you are to lenders. For example, if you apply for a mortgage, the bank or lender that you approach will look at your credit score to determine whether or not they should lend to you and whether you are deemed to be a risk or not. Your credit score is based upon whether you have failed to make repayments in the past and whether or not you have any financial background to note.
People automatically assume that so long as they don’t have a bad credit score because of failed payments etc, they will be fine in terms of getting loans and finance packages. This is not the case. Some people, for one reason or another, don’t have a credit score because they have never had anything on credit but this can have as much of a negative impact as having a poor credit score, so it is important to build up a credit rating as soon as possible.
There are many ways in which people can do this. Mobile phone contracts are a good way, especially for youngsters, if they want to build up a financial reputation. In fact, paying any kind of monthly contract will help to build up a credit rating.
Generally speaking, paying bills on time is the best way to build up a good credit score, but a couple of other things that can be done include; getting on the electoral roll. Not many people realise this, but just being on the electoral roll will mean that lenders can easily check you are who you say you are.
Also recommended is getting credit cards. This may seem strange as you’d think it would look to many people like you had a problem with spending if you had lots of credit cards being used at once. Actually, the opposite applies. If you have credit cards but have never failed to miss a payment on any of them, you are deemed to be trustworthy and your credit score will be higher.
You should never continually apply for credit, however, as this may highlight that you are desperate to get hold of cash and this may go against you.
It’s common sense and pretty basic stuff to get a credit score up to scratch. But if you don’t have a top-notch rating, lifelong problems with finances will start, so make sure you take heed and follow the tips.