Learning Financial Literacy and Financial Inclusion to Support Healthy Credit Habits

Credit can play an important role in accomplishing life goals. Whether it’s to buy a new home, purchase a vehicle, or start a business, credit can help make it happen. But when not used wisely, it can hurt the debtor in the long run.

While some people have good money management and finance skills, budgeting and building credit may be difficult for others. 

Understanding Financial Literacy and Financial Inclusion

Financial literacy is about having the knowledge, understanding, and skills to make financial decisions, such as what to do with salaries or how to save for the future. However, financial inclusion does one more thing: it ensures everyone is on the same page regarding available financial products, such as how to start saving or get interest on a savings account.

Combining financial literacy with financial inclusion helps in meeting financial obligations while also securing a financial future. This relationship supports financial wellbeing. To reach what individuals desire, financial literacy and inclusion must work together. Committing to both aspects helps people become more successful and financially secure.

How Can Financial Inclusion Support Healthy Credit Habits?

Financial inclusion is the idea that everyone should access the same financial services, wherever in the country. It allows people to build a solid credit history and make better credit decisions. Financial institutions, creditors, and consumers should work together to build a better credit system by offering products and services in their best interest.

This can manifest in different ways:

• Offering customers easy-to-use digital tools that allow for safe and secure applications for credit and other financial services
• Giving customers options for financial security and support in rebuilding credit 
• Increasing the credit limits of a customer who shows a consistent pattern of making positive financial choices

Credit Habits Do’s and Don’ts

Having good credit makes life easier. Whether renting an apartment, buying a house, or purchasing a new car, a good credit score helps achieve financial goals quickly. Here are some tips to strengthen credit scores: 

1. Diversify Credit: A typical credit mix includes mortgages, open accounts, revolving credit loans, home equity lines of credit, and installment loans. A small yet influential part of a FICO score is calculated by how diverse the credit mix is. This demonstrates responsible management of multiple credit sources to creditors.
2. Pay Balance on Time and in Full: Regular late or missed payments negatively affect a credit score, making it difficult to get a loan later on. It’s better to pay off the balance in full, but that’s often not possible. If paying off the balance in full isn’t possible, at least making minimum monthly payments on time will suffice.
3. See Credit as a Complement, not an Income Supplement: Using credit to supplement income is never a good idea. Late payments can lower credit scores and cost more in interest fees. 

Conclusion

Although spending money and going into debt can be fun and exciting, being smart about it is important. Spending carelessly on unnecessary things will only cause trouble in the future. With proper credit usage, debtors can enjoy the benefits of responsibly using credit, such as a good credit score and financial freedom.

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