ARTICLE: Why It Is Important To Establish Credit While You’re Young 📷9 min
Your credit report can have a significant impact on what happens when you make various financial decisions. Read the section titled “Why should young people care about their credit score?” Then, answer the questions.
Your credit score impacts many aspects of your life, and it might come into play sooner than you expect. One factor that goes into determining your credit score is your length of credit history. So, the longer you have credit, the better your chances of achieving a higher score will be that’s why it’s so important to start building credit while you’re young. Here are the top 7 ways your credit report is used, how it can impact your life as a young adult and why it’s important to have a good credit score:
Leasing an apartment
When you’re ready to sign the lease on your first postgrad apartment, your potential landlord may check your credit report to ensure that you’re a responsible person who pays their bills on time. Having good credit could make your application stand out. But having bad credit could lead to them rejecting your application, requiring a creditworthy cosigner or requesting a higher security deposit.1
Setting up utilities
Utilities companies often ask for your Social Security number to check your credit. A poor credit history could make it difficult to get services, and not having any credit history may require you to pay a deposit.2
Applying for a job
When you’re applying for jobs, your future employer might look into your credit report to make sure you’re a responsible, trustworthy employee. This is especially true for positions that deal with bank transactions, bookkeeping or management of company accounts. In fact, 29% of employers use credit checks when hiring for certain positions.3
Buying a car
Unless you’re buying a car outright with cash, you’ll need to secure financing. If you don’t have any credit established, you may need a creditworthy cosigner to assist with the purchase. If you have poor credit, you may receive a high interest rate, ultimately increasing the total price of your car. Or worse, you could simply be denied all together. In contrast, if you have good credit, there’s a higher likelihood you’ll receive better rates and pricing for your new vehicle.4
Buying a house
Buying a house may seem like something very far into the future, but establishing a good credit history early will help you qualify for a mortgage down the road. Additionally, good credit can help secure better rates, which could result in tens of thousands of dollars in savings over the life of a 30-year mortgage.5
Getting a cell phone
Aside from the monthly service fees cell phone providers charge, many people are choosing to finance their devices as well. While many college students are on their parents’ cell phone bills, it can be a harsh reality after graduation if you’re expected to have your own account. As soon as you need your own plan or want to upgrade your device, carriers will look into your credit history in order to make sure you’ll make your monthly payments.6
Receiving better interest rates on credit cards and loans
When applying for a credit card or loan, credit card issuers and lenders will look at your credit history to determine your eligibility and interest rate. The higher your credit score, the more likely you’ll be approved for the credit card or loan and the better interest rate you can receive. This will be particularly useful if you have student loans and are looking to refinance them. The lower your interest rate, the less interest you’ll pay, meaning you’ll pay down the principal of the loan faster.