How Bad Credit at a Young Age Can Impact Your LifeFriday, January 31, 2020
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 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
- 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.