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New College Grads Getting Off On The Wrong Foot With Credit

[Wednesday, April 25th, 2018]

For many people, the struggle to have and maintain a good credit score starts soon after graduating from college and embarking on full-fledged adulthood. So says a recent study from lending firm OppLoans, which asked 500 members of the class of 2016 about their financial habits since graduation.

Seven out of ten respondents confessed to at least one of the following behaviors:

• Paying credit card bills more than 30 days late (51 percent)
• Paying federal student loans more than 90 days late (29 percent)
• Paying private student loans more than 45 days late (19 percent)
• Having a utility bill go to a collection agency (29 percent)
• Carrying a credit card balance that was more than 30 percent of the card’s limit (58 percent)

All of these can lower a person’s credit score significantly. Matt Pelkey, the lead researcher on the survey, said these missteps could follow the graduates into their adult lives. “This survey shows that many college students are making early mistakes that can do lasting damage to their credit. They’re starting off on the wrong foot, and many probably don’t understand the consequences.”

The importance of good credit

Having a good credit score is important for many reasons, among them the ability to secure a mortgage, be approved for a low-interest credit card, get a business loan, and even sign an apartment lease. Poor credit can be a huge burden, but it is one that’s easily fixed, with some patience and wise financial moves.

The best way to keep a credit score in good shape is to always make all payments on time. That goes for credit cards, student loans, utility bills, and car loans. Payment history counts for a large percentage of a consumer’s credit score. The second most important thing for a healthy credit score is to keep your debt-to-credit ratio low. That means not having a revolving balance on your card that’s more than 30 percent of the credit limit.

Maxing out credit cards and not making payments on time are the two most common culprits in damaging credit scores. No matter what their age, consumers would be wise to avoid these credit missteps and keep their scores as high as possible.

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