Your credit score is one of the most important numbers you’ll have associated with you in life. That three-digit number will go with you everywhere you go, and will help make the decision on what you can afford and show how trustworthy you are when it comes to lending money. You can do positive things to keep your credit in good standing, including having a low balance on your accounts, paying your bills on time, and having diverse credit. There are also things that you’ll experience in life that will have an impact on your credit profile as a whole. Those events include:
- Going to college: Going to college to pursue a higher education is always a great thing, and is quickly becoming a requirement for many entry level positions in a variety of fields. If you decide to go to a four year university, financial aid may be how you can afford to go to college. Scholarships and grants are available, but many students need student loans to cover the full cost of tuition, room and board, and even your books. Your student loans will be reported on your credit, and you will be responsible for paying them back in a timely manner. Make sure the payments are something you can afford every month. Opt for loans you can pay back 6 months after graduation, allowing you time to save up to make a lump payment.
- Getting married: One of the happiest moments of your life will also reflect on your credit. If you’re changing your name, be sure to notify your creditors of your name change. Your spouse’s debts can also become your debts, so it’d be a good idea to talk to a Certified Financial Planner about how your union will affect your credit, positively or negatively. Decide who’s responsible for debts pre-marriage, and work on how you’ll handle them together after the wedding.
- Buying a house: When you become a homeowner, you’ll more than likely be looking for a home loan to cover the cost, where you’ll pay the bank a mortgage every month to pay the house off over the course of 15-45 years. As with any loan, your mortgage will be reported to the credit bureaus. This is going to be one of your biggest debts, but towards one of your hugest assets. Speak with a loan officer at the bank about your mortgage options, including types of loans, interest rates, and payment plans. Failure to pay your mortgage can result in foreclosure, which will stay on your credit report for seven years!
- Buying a car: You need a way to get to point A and point B right? Although public transportation would be ideal, both for your wallet and for the environment, buying a car is something many people. Regardless of if you purchase or lease your vehicle, you will see the price on your credit report, and your payment history. Again, don’t bite off more than you can chew. Find a car that’s affordable for your budget. You don’t want to be on the next episode of Operation Repo!
- Getting a job: Some jobs will look at your credit report before they hire you, to see if you’re a reliable person to offer a permanent position. When you get a job, it will likely show up in your credit profile as your occupation. It’s really just for general information purposes, showing lenders that you have a job that pays you money so that you can pay their money back.
- Starting a business: Entrepreneurs may need good credit to start their new business, especially if they’re asking for a small business loan to get their dreams started. Your business can have credit too, when you set up a legal entity like a corporation or LLC. It’ll have it’s own Social Security Number called an EIN, and you’ll want to make sure your business’s credit is just as stellar as yours.
So now you know how important your credit report and credit score is, and what life events will affect it. How will you ensure your credit profile reflects a positive image of yourself?