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Credit Mistakes Young People Make

9 May 2017 No Comment

As you start out your independent life as a young adult, the feeling of freedom is overwhelming. You’re living on your own, earning your own money, and making your own decisions.

Now that you’ve got a paycheck coming in, you’ll have plenty of decisions to make–how much to spend, how much to borrow, and how much to save. It’s the borrowing that gets a lot of young people in trouble, to the point of triggering real financial hardship for some.

Many of those in dire financial straits seek legal help to improve their credit. What’s important is to find a company with a good reputation, as there are a number of scam artists out there just waiting to take advantage of desperate people. Doing your research by reading about companies like with these Lexington Law reviews, can help you determine if a firm is the right one for you.

Here are a few things these experts will tell you are the biggest problems with credit today.

Opening Too Many Accounts

There’s just something about having a credit card that makes you feel like a true adult. No matter what your driver’s license says or the importance of that fresh college diploma on the wall, you still feel like a kid sometimes. The ability to fish out a credit card and casually make a purchase just carries all the trappings of adulthood.

And when you’re fresh out of college and working, credit card companies love you. They want your disposable income, and they’ll come to campus throwing out T-shirts and candy bars to get you to sign up.

Don’t fall into the trap. Getting and using a credit card responsibly is good for your credit, but stringing yourself out with a lot of different ones is dangerous. That’s why excessive credit lines can be detrimental to your score. Keep it to a single card and keep it under control.

Carrying Balances

This runs right along that same line. Never charge more in a month than you can pay in full (without undercutting other expenses). A credit card is a tool, a convenience item that is a more secure way of paying for things. It is not money.

A lot of problems start with carrying credit card balances. For starters, it looks bad on your credit report; you’ve just been issued a card, and you’re already carrying a balance on it? Future borrowers won’t like the look of that.

It also costs you money. If you pay your balance in full during the grace period, you will pay no interest. If you don’t, you’ll pay a rate that could be 18-20% or even higher. That’s 20 cents a year for every dollar you owe, and it’s money you never get back. All for the “privilege” of paying with a card.

Being Sloppy With Payments

After four years of sweating deadlines, you may think you’re finished worrying about the calendar. Think again. Creditors of all kinds–not just card companies, but utilities, landlords, and many other people that you make payments to–will report your punctuality to credit bureaus. If you’re late, it hurts your score.

Think seriously about automatic payments. They’ll get your money in on time without you having to worry about it. Just make sure you’re paying a trustworthy creditor, and that you’ll receive an email to remind you that the money will be taken from your bank account.

And if you still mail payments, be cautious. Make sure addresses are clearly visible on envelopes, and always include your return address. Many people leave them off when they’re positive about the recipient’s address. But if that address is obscured by water, ink, or dirt during transit, the postal service has no way to get the bill to your creditor or back to you. The bill is gone and your payment is late.

Getting out on your own isn’t all fun and games. You have to be financially responsible in order to be financially successful. Keeping modest numbers of accounts, paying them off promptly, and staying current on bills are simple ways of avoiding credit problems that will haunt you for years.

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