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Your credit report is your life. Without it, your choices are limited. Everything from applying for a mortgage or a loan, getting a mobile phone contract, internet packages, car insurance and more are all affected by how good your credit rating is.
So, how do you avoid falling into arrears and ending up with a poor credit score?
Closing a credit account might sound like ripping off a Band-Aid: sweet release. But it’s not always that cut and dry. While it sometimes makes sense to close an account, it’s not something you should do without considering potential consequences on your credit history and score. Here are the factors you need to consider before you pick up the phone to cancel your credit accounts.
Your credit score shows your financial health. Based on your credit score, financial institutions measure your trustworthiness and decide whether to approve you for, e.g., a loan or not. Interested in merchant account bad credit? Read this article to know more about bad credit scores and what you can do if you have one.
Your credit score can be easily damaged, and the damage tends to stick around for a while. Just one missed payment, or going over on your credit card limit by a couple of dollars without realizing it, can cause considerable damage to your credit score that’ll still be visible to potential lenders years down the line. Many people who are now great with managing their money find that their credit score is tainted due to mistakes that they made whilst they were young; for example, if you took out a credit card in college that you struggled to repay on your student budget, then this could have a huge negative effect on you in later life. You may have problems if you try to buy a new house, or start your own company and want to borrow a business loan from the bank. Also, if you want to rent office space, you will need a very good credit score as well.
For young people, credit can seem like a strange, unfamiliar new part of life. It can seem especially difficult to begin, since it is impossible to build credit without first obtaining credit. While this may seem like a reverse chicken-or-the-egg type of scenario, it is entirely possible to begin building a positive credit history immediately, even if you have never had one before.
You are not the first person to be in the difficult position of beginning a credit history from scratch, and there are many options available that are designed specifically for such cases. Unfortunately, there are also many predatory lenders that will eagerly take advantage of a young person who is not experienced enough to know the dangers of credit.
The keys to success in building your credit the right way is educating yourself, being smart and using the available resources properly. For more specific instructions on starting out in the wonderful world of credit, read on.
