What Teens Need to Know About Credit
Have you ever wondered why credit is such a big deal? Surely you’ve heard your parents talking about credit cards and credit scores many times, and you’ve probably wondered why they happen to be such a popular topic. If you’ve wanted to know what credit is and why it matters, you’ve come to the right place.
What is It?
First off, you might be wondering what credit even is. Credit is a way for you to buy things without paying money now, with the expectation that you will pay off the debt with your money later on. Credit purchases are made with any variety of credit cards or loans. Depending on how you pay off your debt, you’ll be given a credit score. Your credit score is normally calculated by your past credit history, your type of credit, your current debt burden, and your likelihood to continue to pay your bills on time. Most credit scores range from very poor, the lowest score being 300, to excellent, the highest score at 850. The higher your credit score is, the more likely you are to be approved to make large future purchases that require a credit score.
How it Gets You Through Life
There are many reasons why it is important to start building good credit early. Having good credit will open a lot of doors in your life, particularly when it comes to making financial decisions. For example, good credit is needed when it comes to buying a home or even when renting an apartment at times. Often, mortgage lenders or apartment landowners will ask for your credit history and credit score to see if you will be dependable in your mortgage or rental payments. The higher your score is, the more likely you are to get approved for either one of these housing options. The same goes for buying a car. Some car dealerships even like you to have multiple streams of credit to show that you’re truly dependable in keeping up payments. If you take good care of your credit and pay it off regularly, you’ll be able to develop a score that will someday provide you with the option of buying such large purchases yourself.
How to Get Good Credit
Now that you’ve learned the importance of having good credit, you’re probably wondering how you can build your credit and get a good credit score. First of all, you need to obtain a credit card. There are lots of great credit cards for students that have beneficial rewards for certain purchases, such as cashback rates for gas or grocery store purchases. By using one of these cards, you’ll not only build credit, but you’ll also get money back when you make purchases. Once you have a credit card, try to make purchases with it once a month, and make a habit of paying it off within the designated period. This type of consistency will help improve your credit score.
Hopefully, by this point, a lot of your questions about credit, credit cards, and credit scores have been answered. Now that you’ve learned how these things work, do some research and apply for a credit card that will give you the benefits that you’re interested in. As you consistently work on building your credit, you’ll be better prepared for large purchases and savings in the future.
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