Most of us learned our money habits from our parents or grandparents. Many of us became lucky and learned different credit-lessons from our parents that helped us to follow the path of financial success, but all of us aren’t so fortunate.
Along with what you have learned from them directly, you might have to adapt few other credit facts to make a strong bond with your money.
You might not agree, but our parents might haven’t taught us all about credit. There are few lessons we have to learn on our own.
Brush your knowledge and check out whether or not you know these lessons:
1. Credit reports aren't always correct
The information on our credit report is provided by the credit bureaus. So, we usually assume that the information will always be complete and accurate. But it’s not always true.
According to FTC studies, nearly 25% of consumers find errors on their credit reports.
So, you must check your credit reports regularly. As per law, you can fetch your free credit reports once a year.
While going through your reports, you may find any credit entry that is reported twice in your report. If this happens, it will surely increase your debt-to-income ratio (DTI) and your creditworthiness will be hampered.
2. It’s great to have good credit
Having a good credit means you'll be entitled to get the best offer when you’re going to apply for financing. Having a bad credit score is not only frustrating but also can be very expensive.
If you’re going to apply for a loan with a poor credit score, most of the lenders will offer you loans at comparatively high-interest rates. You may need to deposit a good amount at the time of opening new utility accounts. Even insurance companies also charge you with high insurance premiums.
It’s for sure that as a consumer, you can save a lump sum amount over the course of a lifetime if you have good credit.
3. Credit cards are good
If something bad happens with our finances, it’s very common that we put all the blame to the credit card companies. However, we must know that most of the time it’s our bad financial habits that make us the sufferer. Good financial habits come with positive feelings but bad financial habits always make our relationship bitter with our creditors.
Credit cards are most useful for developing a good credit score or for building a good credit history.
As long as you responsibly use your credit cards, your creditors will remain happy and your credit score will grow.
4. Paying interest can be painful
It’s normal that you need to pay off your monthly credit card bills. But things becomes worse when you also need to pay interest on your card.
In today’s world, most of the credit card companies charge variable interest on the credit card balances. If you decide to pay the minimum payment on your cards and carry your high balances forward, you'll be in a deep trouble. It’s because the interest will be charged on the remaining balance and at the end, you might be paying more than what you actually owed to the creditors.
5. It is difficult to rise but easy to fall
So many times our parents have told us about paying our dues on time. They advised us to keep the debts low so that we could maintain good credit. But what they probably missed out that if we somehow forget a payment, it will become difficult for us.
Being delinquent will lower your credit score more than what you think. A missed payment can drop your score by as much as 100 points. To earn that 100 points back, you need to work very hard.
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