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How Bad Credit at a Young Age Can Impact Your Life

ASB January 31, 2020 | 5 min read N/A

Bad credit when you're young can set you up for a more difficult path as you get older. Learn what you can do to set yourself up for success in the future.

how credit at a young age can impact your life

How Bad Credit at a Young Age Can Impact Your Life

  • 38% of Americans under age 30 have a credit score below 621.
  • Only 14% under age 30 have an Excellent score over 720.
  • A score below 660 is generally considered Poor. Scores under 620 are commonly considered Bad.
  • Lenders view people with poor credit as riskier borrowers.
  • A lower score may indicate a person is less likely to make their payments. This means a lender may not get their money back on time.
  • You must use credit to build your credit score. It takes time so it is best to start while you are young.
  • Bad credit can hurt your chances of getting approved for:
    • Auto Loans
    • Personal Loans
    • Credit Cards
    • Mortgages
    • Employment
    • Housing Rentals
  • If approved for credit, you’ll likely pay the highest interest rates available.
  • You’ll likely pay higher insurance premiums.
  • You may also have to pay security deposits for utilities like cell phones, electricity, or internet.
    • For cell phones with payment plans, you may not be approved or may have to pay more upfront.

Good Habits to Avoid Bad Credit

Trying to build credit and prevent a bad credit score? Looking for ways to repair your credit? Use these tips for building and improving credit:

  • Pay your bills on time. Late payments are a big factor in your credit report.
  • Don’t use all of the credit available to you.
    • Your credit utilization rate (the amount of credit you’re using vs. your credit limit) greatly impacts your score.
    • The less total credit you use shows you’re responsible with your spending.
  • Don’t open credit accounts all at once.
    • Multiple inquiries on your credit report can hurt your score.
    • If you need a loan or credit card, do your research first to see if you’re qualified.
    • Apply only for one account at a time.
  • Keep accounts open.
    • If you already have a credit card, don’t close the account.
    • Even if you’ve paid the balance off and stopped using the card, the account shows up on your credit history.
    • A longer history of open accounts with on-time payments and low credit usage could help improve your score.