When young people are just entering into adulthood, they have a lot of responsibilities and freedom all at once. It’s easy to make mistakes, especially with money, simply because they don’t know any better. Unfortunately, they can end up having to deal with those mistakes well into their adult life. Here are five common mistakes that young adults make which ruin their credit.
- Having Too Many Credit Cards: Some people, young and old, treat credit cards like trading cards. It’s not about collecting as many as possible. Although they need to wait until they’re 21 to take on a credit card of their own, many young people will get more than they can handle. No one should have and use more credit cards than they can afford, and it’s the individual’s responsibility to know their own limit, not the credit card company’s. It’s incredibly easy to charge purchases to a credit card, lose track of how much debt is building up, and then realize too late that they are in too deep. Now they are stuck paying off those debts, the money they borrowed plus interest, longer than they first thought possible.
- Maxing Out Their Cards: Along with having more cards than they need, many young people will make the mistake of using credit for everything. If this happens, they’re likely to go over their limit. If this happens on one card or many cards the spender will be left with high interest rates and huge bills.
- Taking On Too Many Loans: Student loans are one thing, and they are pretty much unavoidable for any young person who is continuing their education. But on top of those long term loans, many will take out short term loans, payday loans, as well. These kinds of loans can be very helpful in an emergency when someone needs cash quickly and knows that they will be able to pay it back by payday. They aren’t a means of living, though. Payday loans are easy to get, 25% of borrowers use online payday loans, and because of their convenience many borrowers, young and old, find themselves abusing them.
- Missing Payments: It’s hard to go your whole life without missing one payment on one thing or another, and only missing one or two payments over a long period of time is easily forgiven. But when someone continuously misses payments, not only does it reflect on their credit, but they’re typically stuck with late fees and higher interest rates. Similar to knowing how many credit cards or loans someone can afford, they should know how much they can pay each month before borrowing money.
- Ignoring Other Bills to Pay Off Credit Cards: A lot of people make the mistake of thinking that their credit is only a reflection of their interactions with their Visa card. What they don’t realize is that every bill they have is tied to them and every bill matters. Even if someone pays off every credit card bill they receive, their credit will still suffer if they are missing payments on their car, rent, loans, and other expenses.