The school year is just around the corner and that means that thousands of new freshman will be starting college all around the country. In addition to these young adults trying to figure out their class schedules they’ll also be trying to figure out their new life as an adult. One thing that most young adults ruin before they even fully understand it is credit scores, so in this post we’ll cover some of the basics that all adults should know regarding their credit score.
Most adults have a credit score. A credit score is how lending companies and other financial institutions receive information quickly about how reliable you are going to be if they lend you money.
If you have a good credit score, you are lucky. Many opportunities will be afforded to you that will be denied to other people.
Track Your Credit
If you don’t currently have a handle on your credit and your accounts, now is the time to start keeping track of those things. You may not always be able to hang on by the seat of your pants when it comes to your finances.
Unfortunately, many people are not aware of their credit score and barely even glance at their account statements. But it is important for all people to start making some financial goals so that they do not make any mistakes that are hard to undo.
People don’t seem to realize that the state of your finances can really affect the rest of your life. For example, many divorces happen because money was such a big issue.
Arguments over money can come between relationships and marriage, and they often do. Financial stress can also cause problems at your job, or even cause problems with your health.
The key point here is that you need to be honest about your financial situation, or you will experience finance-related stress most likely very soon. Here are a few questions you can ask yourself when you are trying to sort out your finances and the state of your credit.
How Much Do You Owe?
The first question you should ask is how much you owe. If you do not know, you need to find out.
Even though it may be painful, difficult, or time consuming, you need to find out how much you owe. Finding out how much you owe is the first step in resolving your financial problems.
Although you may think your financial problems are unsolvable, this is not true. You have the power to change your financial situation.
As stated earlier, it will probably not be easy. If you are pretty far in debt, it may take quite a while to dig through all of your papers and financial documents so you can figure out how much you owe.
It is important to remember that debt not only includes debt from credit cards, but also includes debt from loans you may have, like personal, auto, or home loans. Many people tend to forget that these loans still count as debt.
Although these types of debt are more widely accepted as normal, they are still debts that you owe. You should try to sit down at least once a year and revisit all of your debts so you know how much you owe.
Make a Plan
Make a plan of how you’re going to pay back your debts. Making this plan very specific will be the best for you.
If you make your plan specific, you will be more likely to be motivated to pay off your debts. If your plan is not as specific, you may struggle to be able to pay them off.
You should also try to work towards paying off your highest interest accounts first such as credit card or short term loans. This makes the most sense because you are losing the most money by having those accounts open.
Whatever way you decide to pay off your debt, you should stick to that plan and watch your monthly payments slowly decrease. Another great way to get in control of your debt is to make sure your total debts are not over a certain amount of your income.
Most financial experts recommend that you do not get into debt that exceeds 36% of your monthly gross earnings. If you are already over the number or rapidly approaching, you should probably get some serious help with your debt problems.
Usually, people accrue debt because of other reasons besides money. They have some emotional attachment to buying things or they need the most expensive car in order to be perceived a certain way.
If you are finding that you think there are some underlying issues that fuel your problems with debt, you might want to go see a professional counselor or therapist as well as see a financial advisor. This will help you work out the practical and the emotional complexities of your problem.
Try to make sure you have a healthy mix of credit. This means that you have all different types of credit, like credit cards, auto loans, and mortgages.
Try to handle each kind of credit you have the best that you can and you should have an excellent credit score.