Things They Should Have Taught Us In College About Credit and Debt
The more I talk to my friends about credit and debt the more I've realized that many of us younger millennials don't know much about it. A lot of our families didn't teach us and unfortunately, the educational system doesn't make personal finances a mandatory course. I'm no finance expert, but I have learned a few things along the way.
No Credit Is Still Bad Credit
I have a friend that is always suggesting I wait to start making payments on my student loan. I explained to her that I don't have much credit as is and having the responsibility of paying it monthly is working for my benefit. I don't think she got it.
We are always taught how debt is horrible and it stay clear of it at all cost, but we aren't taught about how not having debt can be negative as well.
Having no credit can result in a low credit score and credit card and loan rejections. The point of having credit is to prove to people that you are trustworthy pay on time and without any debt, there isn't a record of proof for you. I know it's sick and twisted that you have to have a debt to have credit, but it's how the system works *eye rolls. The key is not running away from debt, but being wise about it. My monthly student loan payment is low and manageable so making the payments makes me look super responsible.
Spend Less Than 30% of Your Credit Card
I have one credit card which I thought was great for helping me build credit and it is, up until I spent 95% of my credit limit. I wish someone would have told me just because you have X amount on your credit card doesn't mean you should spend it. I mean hello If someone hands me $500 I'll eventually spend the entire $500. But that's not how things work in the credit world. Spending most of your credit limit can lower your credit score. Think of it this way, if you’re spending less than 30% it'll be easier to pay down so win-win.
Make A Plan To Pay Down Your Debt
One of the first ways to make a plan to pay down your debt is to learn from your unhealthy spending habits. When I got my new job I vowed that the get my finances in order. Before I had the bad habit of splurging first and worry make plans for adult things later. While there is nothing wrong with splurging jobs can be unpredictable. You can't assume a job will be loyal to you while you're trying to get your finances in order. One time when I was on a mission to save money I was let go of a job and my boss was fully aware that I was trying to save. People care about there money, not yours. It's best to handle your business as soon as you can and save the wants for later.
My current plan is focused on raising my credit score. In order to do this, I've checked my credit score, been paying down the debt I have and doing research on some other best practices that can help me. Whatever your plan is do what works for you. I'm sure to some people think I'm crazy for paying off my student loan now, but it works for me and credit aside I'd rather pay it off now than have to worry about it later when I might want a house or potentially need a business loan. I prefer to only take on one loan at a time if I can help it.
What are some questions you have about credit and debt?