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Young adults can benefit greatly from building a good credit history

[Tuesday, October 26th, 2010]

According to financial counseling experts, credit card customers of student-age will greatly benefit from establishing a very good credit history. A credit score is a measure of the creditworthiness of an individual as assessed by many money lenders. Without a good credit rating, customers might find it hard to meet certain needs that go beyond just cards. Those individuals with low credit rating might be denied loans or charged high premiums on insurance rates. Credit ratings also impact the employment since prospective employers can check these credit ratings from bureaus to find out more about their personality and habits.

The FICO or Fair Isaac Corporation credit score ranges between 300 and 850. Generally a credit score over 650 is considered good. This score depends on the consistency of payments, the amount of outstanding balance or debt owed by the credit card customer, the time for which you have used the credit or the duration of your credit history and most importantly, how many times you have applied for credit and how many types you use. In the current economy, a massive number of over 40 million people have credit scores below 599. This only implies that fewer and fewer people are considered credit worthy. In such a scenario, establishing a good credit history is quite important.

Young people need to act responsibly especially when it comes to their credit cards and finances, because their current lifestyle and habit will affect them in the future. Factors such as hitting the credit limits on credit cards, missing bill payment deadlines or opening many different credit accounts will affect one`s ability to get approved for loans in the future. Financial success will be bestowed upon young individuals who manage their finances and credit well.

It is advisable for students to start building their credit history in the last years of college. This will show that you are disciplined and respect the commitment to make consistent monthly payments over a long period of time, considering that you might need a loan in the future. Credit history needs to be established too, since the duration of the credit history will affect the credit score. There are some tips that young adults can follow. Paying bills on time, including credit card balances, cell phone bills and utilities like electricity is important. The number of credit card accounts you have must be limited and credit should be used sparingly, staying below 30% of the credit limit.

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