As a young person starting out in the working world, you probably have various goals for the next few years: to advance in your career, to own your own home, to buy a car. Most of us aim to acquire the items that we believe make our lives better.
To do so, however, you’ll most likely have to access credit at some point – the most obvious occasions would be for the purchase of a home and for buying a car. When you apply for the credit, the credit-provider – a bank, for instance – will first check your credit record. Having a good credit score is crucial for you to qualify for the credit you want – and it will also affect the rate of interest you are charged on the money you borrow.
“You need to be conscious at all times of the importance of keeping your credit score looking good,” advises Jonathan Hurvitz, Chief Financial Officer of Teljoy.
Here are 6 ways young professionals can maintain a good credit score:
1. Learn how to budget. This is central to developing financial responsibility. It’s an excellent way of tracking – and being aware of – not only your monthly expenses and what you need to survive.
2. Always focus on living within your means. If you are spending more than you earn, you should analyse what your expenses are and see what you can cut down on so that you never spend more in a month than you earn. If you buy things that are not really necessary, and use credit for these things, you can get into an unmanageable spiral of debt that could sink you financially
3. Be careful about not buying too much with your first paycheck. Making those purchases will in all likelihood involve a hire-purchase agreement or a credit card purchase. You will then immediately incur extra debt – the interest on the credit involved in the purchase
4. Start off buying the necessities only. Rather save up for the costs of buying the other items you may want in the future. The price of the items will increase substantially if you buy everything on credit, and you may find yourself having a huge extra debt burden because you will have to service the interest you will be adding to the total purchase price of the goods
5. Analyse the credit you have before you get involved in another credit purchase. This will help you ensure that you have enough funds each month to make the credit repayments in full and on time. Falling behind or making a payment after the due date will also affect your credit score negatively. Having a good credit score means that a credit-provider will consider you to be trustworthy and so they will be more confident about offering you the funds you want.
6. Some employers also look into your credit record. If you are applying for a position that involves some understanding of or responsibility for finances in the business, your chances of being selected for the position may be smaller if your credit record looks poor