Finance for Millennials
October 21, 2015
Why building good credit matters and how to do it effectively.
As a millennial, you or someone you know has been strapped with a tight budget and struggled to “get that dream job” you worked so hard for in college. It has come to our attention that 63% of you do not currently own a credit card. While we certainly understand the desire to avoid incurring large amounts of debt, you need to know that good credit is an asset that you can leverage to your advantage if you:
- are an entreprenuer planning to launch a business
- plan to make large purchases such as houses or cars in the future
- need to rent an apartment under your own name
Building and maintaining good credit affords you more purchasing power when it comes to both personal finances and starting a business.
35% of your credit score is determined by your credit history!
Let’s say you need to make a financial move, such as renting an apartment, getting a good interest rate on a mortgage or purchasing a car. Your credit score will affect the approval process and the interest rate you receive. Building a good credit history (making regular payments) takes time and makes up about 35% of the credit score formula.
We also found out that many of you have a strong interest in learning how to run and own your own business. Being an entrepreneur means you will have to get serious with building good credit. A few facts from a study by ICBA (Independent Community Bankers of America) revealed that 41% of millennials want to start a business and almost a quarter of millennials currently have income from a business or businesses in which they share ownership. Does being described as entrepreneur sound like a good fit for you?
Here’s how credit will affect your ability to get a business loan:
Your personal credit score is largely what lenders use to measure loan worthiness. When they look at your credit report, the lender is assessing your ability to pay back a loan. In other words, the lender wants your personal credit report to indicate that your business will meet its obligations.
Building and maintaining good personal credit allows you more purchasing power across the board, in your personal life and business. Our accounting team excels at helping our clients at all stages of their lives. We can guide you in building a credit history, saving for large purchases, and starting a business if that's your goal.
Email us if you need help building good credit.
This article was featured in our Millennials Special Edition of 4SIGHT. Sign up free to receive 4SIGHT, our monthly newsletter of helpful financial articles, tips, events, and monthly IRS deadlines.