National Get Smart About Credit Day is being observed this year on October 17th.
Sponsored by the American Bankers Association, this day represents a national campaign where volunteer bankers help counsel young people on responsible credit habits.
The importance of sound financial management is something that should be taught at a young age. Learning healthy credit habits and how to avoid bad credit habits can be one of the most valuable lessons young people can learn before they become responsible for their own finances.
SmartBiz Loans is a strong supporter of credit education. We facilitate low-cost SBA loans for small business owners. One important requirement entrepreneurs must meet is a healthy personal credit score above 675.
Unfortunately, some small business owners seeking low-cost funds fail to meet that threshold. SBA loan proceeds can be used for a variety of business building initiatives. Many small businesses are unable to expand without new equipment, additional employees, restructuring of expensive debt, inventory purchases and more.
Responsible credit management becomes more important as “millennipreneurs,” people 20 to 35 years old, start more companies.
Building a solid credit history and maintaining a high credit score can have a dramatic impact on your quality of life now and in the future when you're considering applying for a loan or even a prepaid debit card. Here’s a short list of financial goals you can reach with good credit.
- A home purchase
- Buying a car
- Starting a business
- Funding a small business
- Getting lower interest rates
NerdWallet briefly outlines 5 ways you can initially establish credit.
- Apply for a secured credit card. If you're building your credit score from scratch, you'll likely need to start with a secured credit card
- Apply for a credit-builder loan
- Get a co-signer
- Become an authorized user on someone else's credit card
- Get credit for the rent you pay
Once your credit is established, it’s important to maintain high scores. There are several guidelines to follow to keep your scores in check.
- Keep balances low on credit cards and other "revolving credit”
- Pay off debt rather than moving it around
- Don't close unused credit cards as a short-term strategy to raise your scores
- Don't open a number of new credit cards that you don't need
A good place to start your journey to good credit is to be aware of your scores. Regularly check your credit score and history at least twice a year. There are several companies that offer free credit reports like Credit Karma and NerdWallet. This strategy helps you catch mistakes and issues early so you can address and correct them. These days you have plenty of options to get your credit reports for free. The Federal Trade Commission has steps to take to get your reports at no cost.
For more information on credit scores and their importance, visit the SmartBiz Loans Small Business Blog: Build and Manage Your Personal Credit Scores.