Ready To Get Your First Credit? Here’s What You Need To Know
Are you ready for your first credit? Taking credit can be a great financial tool, but if used irresponsibly, it can get in your way by putting you in excessive debt and imposing unmanageable payments.
These days, getting credit is fairly simple. You can obtain credit or take loans from banks, financial institutions, and other lenders for any sum between 1,000 and 10 million INR or even more. Borrowing has, in fact, also become customary.
Why do People Take Credit?
People take credit for practically everything, including the purchase of houses, cars, household appliances, mobile phones, and to start new businesses. Some people borrow money for medical expenses, while others do so for wedding expenses. Some take out loans to fund their ideal vacations, and others taking out loans for higher education has become more common in recent years.
But on the downside, credit can be easily exploited. Due to the ease of online purchases, a lot of people unintentionally rack up enormous amounts of credit with high-interest rates that they are unable to pay down on a monthly basis without compromising their finances. Your credit score will be automatically lowered if you make payments late or miss payments completely, which will hinder you from obtaining low-interest loans in the future.
What is Credit History?
A credit history is a record of all the financial transactions you have made. It is a well-established history of a borrower’s ability to repay their loans. Your credit history determines your credit score or credit rating.
For a person to reach a comfortable threshold with regard to their credit score, that person must have a credit score of 700 and above in the range of 300 to 900. This three-digit number helps decide whether or not you can get a loan, as it represents your financial creditworthiness with a lender.
Why is your Credit Score Important?
Your credit score is a number that represents a risk to the lenders you borrow money from, and it’s important because it affects the likelihood that your credit card application is approved. If your credit score is lower than the rating required by the bank or lender, they may refuse your application. Simply put, a higher credit score means you’re generally seen as a lower risk to lenders.
Tips to Build Credit for the First Time
Open a bank account.
Opening an account helps you build credit. This means you can enjoy the many benefits of being an account holder, including getting a loan, credit card, account statement, and more.
If you manage your account properly by making regular deposits and withdrawals, it indicates financial responsibility that qualifies you for credits in the future. Your account statement can also indicate your ability and is useful in helping financial institutions make decisions when trying to get a loan.
Get a credit card
To get credit, you only need to get credit and pay it back quickly. Your activities on the credit card will help build your credit score. The amount of your repayments and the level of responsibility you retain when using your card says a lot about your decision to get other loans.
Self-evaluation for loans
Today, a number of internet tools are available for determining your creditworthiness. Simply enter your income, asset value, expenses, tax liability, and other liabilities into the online calculator. This tool will provide you with a fairly accurate estimate of the amount of credit or loan you qualify for. Additionally, it will include information on the credit’s term, EMI amount, and other things.
To enhance your credit limit, you can also include additional sources of income from your families, such as your spouse’s salary and rent from any leased properties, among others.
Get credit score
A bank or other lender will often carefully review your credit applications to check for ratings. In other words, they will determine whether and how you can repay the debt. If you’re a first-time borrower, you may be able to obtain a higher rating if you have fewer liabilities and a higher income.
The loan sanctioning process is accelerated by obtaining a credit report from a recognized rating organization and including it with your application. Also, getting your credit report would also let you know if you have fake credit in your name.
Avoid opening multiple credit accounts.
If you don’t open several accounts, it’s simple to keep your credit score stable at all times. Creating several accounts might result in financial irresponsibility. What stops you from spending the money when you have it available to you?
Your prospects of keeping a high credit score are completely destroyed if you are unable to repay the loans you take out on various accounts. When managing various accounts, you could also be tempted to make hasty financial judgments, and occasionally, you might neglect the overtime from some accounts.
Final Words
Keep in mind that money borrowed or spent on credit was not something you earned. Loans and credit can have a negative impact on one’s physical and emotional well-being, according to medical research conducted in the US and papers released by the National Library of Medicine of the US government.
This does not, however, imply that credit should be avoided. Make use of loans to accomplish your dreams. Just be careful not to let a credit put you in a financial bind or give you health issues.
