In current times, as young students we all want to be financially independent. There are so many courses or activities that we wish to pursue, but gets limited by our financial constraints.
We all want to gain financial independence, but, very seldom does each one of us know that the first step to gaining financial independence is to build good credit. In this blog, we would be teaching you the ways to build good credit for yourself so that you can quickly arrange a financial aid required later.
Here, are the ways to build a good credit:
1. Clear your balance each month: Firstly, as a student you must take care to use your credit card only when you have to make purchases within your affordable limits. This is so because, if you use the credit card beyond the due amount then you are charged interest on the balance amount. This has a negative impact on your credit score.
Moreover, you must avail a credit card facility if you have a source of income. As a student, you may be working part-time or maybe freelancing to support your studies. In such instances only, you must opt to carry a credit card in your name.
2. Never stand as a guarantor for friends: Standing up for friends in need is a great thing but should be avoided when it comes to money matters. Of course, your friends would also want to avail a credit card facility and may ask you to sign as a guarantor.
This is a highly risky thing because if your friend elopes or defaults, then your credibility is put at stake by the banks. Now it is you who would find it extremely difficult to take any financial loans in the future and that too because of someone elses’ default.
3. Use your loan wisely: The educational loan if taken should always be used to support the education. Partying, hanging out with friends, pubbing, should never be done with the money received as a loan.
The students often tend to ignore paying the interest on the loan, regularly. Of course, there are plenty of banks offer loans on subvention schemes, where you are not required to pay any interest during the study. But, whatever be the case you must be extremely cautious in spending the money taken as loan. The more you save, the sooner you get rid of the loan. If you delay the interest payments, then, you earn a negative credit image.
4. You can seek authorized access to your parents’ account: You can associate yourself as an authorized user to your parents bank account. Your parents can monitor your expense pattern and can guide you to handle expenses better in future. Of course, the parents must take care not to provide access to all their bank accounts. The children should be allowed to access only those accounts where the credit card has limited liability.
5. Start Saving and investing early: As a student, you don’t have enough financial freedom as you want to enjoy life and have fun with friends. But still, you can keep aside a few hundred bucks (say 500 Rs), and invest them in mutual funds. This gives you enough financial corpus later that you can bank on.
These are some of the ways in which a student can build good credit, which helps him or her to avail hassle free financial aid in later stages of life. Building on a good credit record often gets ignored by most students, but, indeed it is essential to avail hassle free funds on loan later in life.