70 Percent Hurt Their Credit Score Before Turning 30
According to a survey by Credit Karma, nearly 70% of Americans have at least one major negative mark impacting their credit score.
Why so many people hurt their credit score
In fact, the most common mistakes are missing a loan payment a payment on a credit card or having an overdue account that has been sent to collections. And as is generally the case when it comes to credit cards, the financial blunders are the result of charging more than you can realistically afford to pay back.
This is serious stuff that can do real damage to your credit score — and therefore your ability to take out a mortgage, car loan or credit card with a good interest rate — for years to come. It may also keep you from getting a job or apartment, given that credit checks are often a part of the normal vetting process.
As is often the case, some of those negative financial marks on people’s credit are the result of circumstances outside of one’s control. According to Credit Karma, the most common reason people give for their credit missteps was a financial hardship due to job loss. However, difficult financial circumstances aren’t always the cause, about 40% of people admitted that their own financial irresponsibility was at least partly responsible.
About three-quarters of people say that not having a better financial education has contributed to making financial mistakes. And most people admit that managing their finances becomes easier once you reach your 30s because you have learned from experience and often mistakes.
Among those who have defaulted on a loan or had an account go into collections – 61% say they were rejected for a credit card, 31% were turned down for an auto loan and 16% were turned for a mortgage
Having an account go into collections or defaulting on a loan or credit card are some of the bigger credit mistakes you can make and they typically linger on your credit reports for seven years.
How to build good credit score
When it comes to building a good credit score, the most important thing you can do is to keep your accounts in good standing. That means, pay your credit card bills and loans on time – each month. Thirty-five percent of your credit score is based on your payment history.
The other thing you should do to build good credit is not max out your credit cards. In addition to being difficult to pay off, maxing out your credit cards will hurt your credit score.
Credit experts recommend that you keep your credit utilization ratio (the percentage of your credit line that you’re using) at 30% or below. For example, if you have a $1,000 credit limit, that means charging no more than $300 to your card.
