5 Things Young Adults Can Do To Ruin Their Credit Foundation

Starting out independently in the world, no longer under the wing of parental financial help can be a difficult path to navigate for many. Unfortunately without proper personal finance education from an early age, the transition can bring about many common money mistakes that can effectively ruin the younger generation’s credit foundation.

While many people need to learn from their own mistakes, some of these financial errors can be costly and cause a negative ripple effect into the future. Here are the 5 most common money mistakes young people keep on making:

Too Many Credit Cards

Young adults now need to wait until they are aged 21 in order to get a credit card of their own. In the anticipation of the financial freedom they have achieved, many will order too many credit cards without first understanding how credit cards really work and without the financial capabilities (ie: a job) to pay off the purchases being made. Even in light of the increased focus on responsible personal finance, some young adults still do not learn the concept of credit cards and continue to treat credit limits as if it is free money.

Maxing Out Credit Limits

Too often, young adults will make the mistake of utilizing credit cards for all reasons, including ones that are not part of living within their means. They will often max out not only one of their credit cards they will run up all the credit cards they hold to the maximum, incurring not only high interest charges but also balances they soon lose control over.

Forgoing Bill Payments

In association with running up credit card debts, young adults are also guilty of skipping out on bill payments in order to have more spending money in their pocket or to cover ‘more important’ financial obligations. Paying late or missing out on bill payments altogether can mean that credit foundations crumble quickly. It can also lead to costly penalties and interest charges that only add burden to the existing balances.

Taking on Other’s Financial Responsibilities

When you are young and ‘in love’ especially for the first time it can seem like a natural next step to take on the other person’s bills and may even go so far as co-signing on a loan. This happens a lot in cases where one party seems to always have more money than the other party – and typically because that party doesn’t have a job or manage their financial lives properly. Co-signed loans and other financial ties are legally binding even after you break up the relationship. If the other person is not dealing with their financial responsibilities, be assured your credit foundation will slide downhill just as fast as theirs does.

Disregarding a Budget

Young people who were not the importance of living within or below their means often dismiss a budget as too constricting. Rather they pay bills as they can, allocate money towards their entertainment wants, and think nothing about saving for the near or distant future. Without a proper budget or a financial plan for money management strategies – even the most basic ones, young adults are setting themselves up for a life of debt, financial frustrations, and an ongoing poor credit profile.