When you start out in college it feels like you have limitless opportunities awaiting you. Any career path is open to you as long as your determined enough to pursue it. You begin to plan out how you’ll live your life after college is over, owning your dream car and living in that perfect house. However, there is something that can potentially hurt your chances for that ideal future and this threat can usually be avoided while you’re still in college. This potentially life-altering threat is none other than your credit score. Earlier when I was looking for a job in college I happened to work for a credit repair company for some time and it opened my eyes to the dangers of having a bad credit score. Before I begin discussing it with you let me go over what a credit score is for those who are unsure of what it is.
What is a Credit Score?
A credit score in essence is a complete analysis of an individual’s credit history. Every purchase you make using a credit card, every loan and loan payment you’ve ever made, the length of time you’ve had credit cards, and the number of credit cards you own are used to create an individual’s credit score. A credit score typically ranges between three hundred and eight hundred and fifty points. Three hundred is the lowest an individual can typically go and means that your credit is considered bad while an individual with an eight hundred and fifty credit score is considered an individual with excellent credit.
How Does Someone Get Bad Credit?
There are a number of ways that your credit score can go down and luckily if you have the foresight you can typically avoid them before they ever happen. The number one thing that usually hurts people’s credit scores is credit card debt. This usually occurs people buy things with their credit card that they can’t actually afford. Then when it is time to pay back what is owed these individuals are unable to pay. This not only means that they will have to pay interest on what they owe the credit company but also causes the credit score to lower due to the individual not paying the money that they owed on time. That is the most common reason though, other reasons could be getting loans from a bank and not paying the loans on time or the scariest reason of all identity theft.
Will the Bad Credit Remain Forever?
Negative marks on your credit score can eventually be removed from your credit score and in the case of identity theft, it can be removed very quickly. However, it can be years before you can remove those negative marks from your credit scores. An easy way to do this would be to go to a credit repair company and have them go over your credit report with you and help you find the negative impacts on your credit score and help you plan out how to remove those marks and show you ways to improve your credit score at the same time. That is typically the easiest way for individuals to remove negative marks and at the same time build up their own credit score.
How Can I Build Up My Credit Score Safely
When I received my first credit card I was both excited and apprehensive at the same time. My dad had told me that there was a way for me to link my credit card to my bank so that I could schedule payments for my credit card if I ever forgot to pay. If you’re as forgetful as I am about these things then I would highly recommend that is the first thing you do after activating your credit card. Doing that should help prevent late payments from occurring so long as you have money in the bank account you linked to your debit card. After that there are only two simple policies that you should follow that will not only help you build up your credit score but also help you save money over both the short term and long term.
The first is to only purchase what you know you can afford. Usually, when someone gets their first credit card they use it as their main source for purchases and that is generally an acceptable decision. After all, in our society, most purchases conducted are through credit cards nowadays. However when you are purchasing something just make sure that what you are purchasing is something that you will be able to pay off. For example, if you’re using your credit card to buy groceries that should be considered a good purchase. If you decided though to use your credit card to purchase the most expensive laptop on the market knowing that you would be unable to pay for it without a credit card then that would be considered a bad purchase. Whenever you’re about to use your credit card always ask yourself whether you can afford to make this purchase right now. If after you’ve asked this and know you can’t it is probably best to avoid making that purchase right now.
The second policy you try to follow is to only purchase what is needed with your credit card. In my own personal life, I try to rationalize things into needs and wants. Whenever I’m shopping I ask myself do I need this right now or do I just want it. I will be the first to admit that most of the time I know that it is simply something that I want and not something I need. After I answer that I have to make a decision will I save my money now when I need it or will I spend it now and regret it later. This is a lesson that I have had to struggle to learn through plenty of mistakes and even after all this time I still struggle with it. This does not mean however that I am completely frugal with my purchases now. I simply limit how much I spend and because I have been following those simple policies for myself not only am I debt-free and almost out of college but I have also been able to improve my credit score drastically since getting my credit card.
I can’t promise that following through with these decisions will be an easy decision in your life. Especially when you see others having the time of their lives and spending like there is no tomorrow. However by following these steps in your personal finances and you will be securing your future. You will be able to look back at those moments and breathe easier knowing that financially your more secure than most. While those people will be struggling to pay off their debt and trying to get acceptable loans you will not only be able to ensure that you receive better loans from banks for a new car and house when you decide to take that big step but you will also be laying the groundwork for the future by ensuring that you’re not spending more than you are able to afford at the time.
