Common Credit Mistakes Young People Make

No one is perfect, and that includes when it comes to credit. Even if you’re young and just starting out, there are a few credit mistakes you should try to avoid. By understanding what these mistakes are, you can take the necessary steps to protect your credit rating and maintain a good credit history. Read on to find our more about credit mistakes made young and information about credit repair Australia.

Having good credit is beneficial at any age, but it’s especially important when you’re starting out as an adult. Having a positive credit history and a decent credit score can help you access doors when you may need a new job, a car loan, auto insurance, an apartment, and perhaps a bank account.

You may want to begin establishing credit sooner than you thought if you want to have excellent credit. Using your early adult years, between the ages of 18 and 21, to build your credit history and score might be a good idea. However, while you’re young, it’s also crucial to understand that building one is something worth striving for—and not necessarily achieving right away. If you’re thinking about entering the world of credit finance, keep in mind these frequent blunders that will getcha!

No one comes into the world with good credit. In fact, until you begin using credit, you won’t have a credit report or score. For most, establishing credit means starting small with a low line of credit that may require a security deposit. And if you think about it, that’s not a bad place for a young person to start. You get a card to use for emergencies or to cover expenses without too much risk of running up a giant balance.

More importantly, you get the opportunity to learn how credit works by managing an account, making timely payments, and avoiding overspending. If you handle your credit card well during college, you’ll graduate with good credit to help set you up for success as an independent adult.

If you are not of legal age to get a credit card, one way you can start building your credit is by becoming an authorized user on a parent or guardian’s credit card account. Some companies like Apple now allow parents the option to add children ages 13 and older as “participants” with spending limits onto their Family accounts; those 18 and older may be added as co-owners on the account.

Opening your own credit card can be a great way to build your credit history. A few student credit cards, including the Journey Student Rewards from Capital One, allow you to open an account with no security deposit. Alternately, secured cards are common for those with little or no credit history.

With a secured card, you provide a deposit upfront that is typically equal to your credit limit. For example, a $200 deposit typically secures a $200 credit limit. If you were to default on your credit card balance, the card issuer would use this deposit to pay off your debt. After a period of successful card management, your card issuer may refund your deposit or raise your credit limit.

Credit cards are a wonderful method to improve your credit score—but they can also set you on the wrong foot if you’re not careful. That brings us to the next credit blunder you’ll want to keep an eye on.

A secured card or a student card can help you establish a good credit history and improve your credit score, but only if you follow excellent credit management techniques. Maintain excellent financial practices to establish a strong credit history and improve your credit rating. Payment history, utilization, mix, duration of record, and new credit are all factors that impact your credit score. There is an advantage as well as a deficit for each.

If you aren’t confident about your ability to manage credit well, you might want to put off taking the plunge. After a year or two of managing your own money, when you’ve gained some expertise, you’ll be more capable of handling monthly expenses and a credit line.

Late payments can incur significant costs to both your credit score and finances. Just one payment made over 30 days late can lower your credit score, and accounts that end up in collections due to nonpayment will further damage your credit standing. Even if you make a credit card payment before it’s reported as late (30 days), your card issuer may charge you a late fee or increase your interest rate as a penalty.

To make sure you never forget a bill payment again, set up a recurring reminder on your calendar or alerts through your credit card and bank accounts. If you’re confident in always having enough money to cover minimum payments, consider setting up automatic payments to remove the risk of ever missing a due date.

If any of your contact information changes, make sure to update your card issuer or loan provider. This way, they can always get a hold of you and you won’t miss any important notices. Similarly, change the payment information on all accounts that use your card–especially if those payments are automatic. Skipping a payment can damage your credit score by appearing as an unpaid collections bill.

Regularly checking your credit report and score is beneficial in a number of ways. You’ll be able to see how you’re progressing in terms of your credit history, and maintaining a high credit score can be motivating.

Monitor your report and credit score regularly to get a sense of how your actions affect your credit. Make a few large purchases on your credit card and you may see a dip in your credit score due to increased credit utilization. Pay off the balance, and you may see an increase in your score. A certain amount of fluctuation is common with credit scores, so don’t stress out over these minor changes. Instead, focus on developing an understanding of how they play out.

It is not required to establish credit and learn to handle it well while you are still young, but if you start your credit career early in life, you’ll have a leg up on other applicants. You’ll face less difficulty passing scrutiny from prospective employers, getting accepted for a car loan or an apartment lease, refinancing student loans at favorable rates, and maybe even using rewards credit cards if your credit score and clean credit report are good. It takes some work, but if you’re dedicated and able, it’s always worth it to construct excellent credit.

If you are struggling with a low credit score, Clear Credit Solutions can help when it comes to credit repair Australia. We offer our clients a range of services to improve their credit rating and give them the best possible chance of obtaining finance. Services such as removing bad credit, such as defaults, court judgements and fraudulent enquiries can go a long way in repairing your credit file. By improving your credit score, you will be able to access better interest rates and terms on any finance that you may need in the future. Contact us today for more information or visit our website to learn more credit repair Australia.