Many have this misconception that taking a loan at a young age should be avoided as much as possible because it will impact the spending habits of youths. However, as much as it is imperative to spend money responsibly, it is equally important to have high creditworthiness to make financial decisions freely in the future. The youth start earning at the age of 22-25, where they are hesitant to take credit during their early professional lives. However, this is the time to start building your credit score so that you can get more loans at lower interest rates later. Youth are notorious for their risky, whimsical behaviour, making it difficult for banks to trust them. Thus, banks depend upon the credit score to determine the creditworthiness of people, especially young professionals. Some of the advantages of maintaining a high credit score are:
- Secure low-interest- This interest rate is significantly less when you have a high credit score, so it is better to start small credits at a young age and maintain the credit score as much as possible. You can also apply for a virtual credit card to get started with your journey.
- Get a loan comfortably- The credit market segment of people between 22-25 is about 60 million. Banks are trying to leverage it and encourage more young people to apply for credit cards. It can help you avail of loans very conveniently in the future. Your credit card utilization or the relationship between your credit limit and your spending is analyzed by the bank. You may be considered a high-risk borrower if you have credit card debt and high credit utilization.
- Avail best credit to fulfil your dreams – There is a tremendous rush of energy in the fresh minds. The young generation likes to try different fields to discover their passion and explore new opportunities. A high credit score will allow you to support your endeavours financially with better loan options and lower interest rates.
- Get equipped to take risks and explore more opportunities- The young generation wants to explore new opportunities by treading on risky fields. You can avail of a stable financial source with better loan opportunities at high credit scores.
- Financial discipline- Your loan may qualify you for a low-interest rate personal loan allowing you to save money. Hence, you will develop the habit to track expenses to improve credit score It will improve your overall financial discipline, in general. Taking long-term and informed decisions can help you achieve your goals.
The following are some ways to boost your credit score:
- Apply for a low-limit VISA credit card or loan
- Track your credit score & set up automatic balance alerts
- Raise your credit limit gradually
- Spend less, avoid late payments
- Pay multiple times instead of one big payment
By taking these conscious and deliberate steps at an early age, you will set the foundation for future financial freedom. Maintaining a good credit profile will give you a sense of security in the later years.