In an effort to better educate our Belhaven students about managing their finances we recognized the importance of National Financial Literacy Month and will be posting helpful articles concerning credit, financial aid, identity theft and personal finance.

Check out this helpful article about credit.

Keeping Good Credit

No matter how old you are, you’ve probably heard people talk about their credit score. Car commercials often mention it and you may have had your credit checked when you signed a cell phone or cable contract. What exactly a credit score and why is it so important?

Your credit score is like your financial reputation and you begin establishing a credit score whenever you first sign a cell phone contact, buy a car, rent an apartment, or take out credit cards. Lenders, insurance companies, landlords and even employees may be interested in your credit score since it is a record of your financial history, and it shows how financially responsible you are. It takes no time to bring your score down, but can take years to work back up to a good score and having a low credit score can make it difficult to get certain jobs, be approved to buy a house or receive other loans.

Your credit score is made up of five main factors:

1. Payment history: this will show if you’ve been on time with payments and how reliable you are.
2. Amount of credit used: this can include mortgages, student loans and credit cards.
3. Age of credit: the longer you have accounts in good standing the better it is.
4. Types of accounts: having various kinds of credit, either through student loans, credit cards or car loans can show how you handle different kinds of credit.
5. New credit and inquiries: when a cell phone or insurance company looks at your credit score it doesn’t affect it however applying for a new credit card or loan can potentially lower your score.

If you don’t have any credit yet, getting a credit card is a good way to start however it’s vital that you make sure you are responsible and pay off the balance. Using a credit card can feel like free money since it’s not coming directly out of your account so be sure to track your spending so it will be easier to keep under control. Only use a credit card if you know you’ll be able to pay the balance off.

To maintain good credit make sure your payments are on time and avoid taking out too much credit. Retail stores love to tempt people with discounts and free items if you apply for a card, but the discounts may not be worth it if you already have a lot of credit cards or loans, and you run the risk of potentially lowering your credit score. It’s also important to check your credit score once a year so you’ll be aware of your current score and to check for errors. This is also a good way to catch identity fraud, which can destroy your credit. To find out what your credit score is go to www.annualcreditreport.com.

Having good credit is important so be sure to stay financially responsible and make sure you don’t overwhelm yourself with loans and credit cards and be sure to make all of your payments in a timely manner. Not only will this show others you know how to manage your money but it will also gradually build your credit score, which will benefit you in the long run.