Starting your career early can help in building a better future. The decisions we take in our 20’s help us when we grow older to reap the benefits. Your parents might have told you about saving and investing your money as soon as you have started to earn it. They are correct as investing at an early age can increase your profits more than two fold or three fold. Not only does this help your profits but also it affects your financial profile which includes the main highlight i.e. your credit score.
Everyone knows the importance of a healthy credit score. It can help you get the loan you desire quickly, at lower interest rates and also better terms. Not maintaining it properly will affect your future loan possibilities. While we are in our 20’s we are unaware of certain factors that can affect our credit score. Most of the times because of being aware we believe in misconceptions that are completely false. These are dangerous and will affect your financial profile. Hence we have listed 5 such misconceptions that you must avoid at any cost.
Zero Debt is good – A common misconception among the masses is that zero debt is good. The youth think that if you do not take a loan or use a credit card, it will help them in their future. But this is not the truth. Without any credit history, the Banks and NBFC’s cannot judge your credit worthiness. Without any credit history, your credit score will always be bad.
Many credit cards will help increase your credit score – Another common myth that people below 25 believe in is that more credit cards will help you increase your credit score. This is absolutely wrong. Whenever you apply for a new credit card, your credit history is checked. If you have applied for multiple credit cards within a short span of time, you will look like a credit hungry person and that is not good for your profile.
Late payments once a while is fine – Late payments in a credit card are really bad. This is because it attracts a higher rate of interest on the bill amount. With every late payment, your credit score will be affected for the worse. Although it is important to have fun but it is equally important to pay your bills on time.
Living off on Minimum Amount Due is fine – Another misconception is the usage of your credit card. Since we are in our early 20’s we end up on a spending spree and live off on our credit card. Hence we get easy on our repayment terms. We end up paying the minimum amount due and keep piling on the debt. This is a bad step and will affect not only your savings but also your credit score.
Closing credit card after repaying dues is good – Wrong. When you close a credit card, all the history associated with it gets cleared off quickly. This is bad as if you had a good credit history with that specific credit card, it will get wiped off your score. Hence your score will keep declining whenever you close a credit card.
Overall, using a credit card is a very important task and if you sensibly use it, the benefit it has on improving your credit score is high. Hence at Ruloans, we advise our customers to be wise while using credit cards and always pay your bills on time for a better future!