Blogging for Change

Why so many young adults accidentally destroy their credit

by Jesse Campbell on
3/2/2016
in Using Credit

Good credit is a little like insurance – you don’t really think much about it until you need it. Which is probably at least part of the reason why young adults tend to do so much damage to their credit without even knowing it.

According to a survey and data analysis from Credit Karma, over two-third of Americans admit to making some sort of significant, credit-related mistake before the age of 30. This includes overspending on credit cards, missing payments, and defaulting on accounts.

Undereducated and unprepared

These kinds of damaging mistakes can really set young adults back just at the moment they would most benefit from a strong credit history. Many personal and household goals can be derailed by damaged credit. In fact, three out of four respondents to the survey felt that the financial mistakes they had made as a young adult negatively impacted the quality of their life.

Probably not coincidentally, less than 30 percent of those surveyed stated that they had had any form of financial education prior to college, with 73 percent believing that financial education could have helped them avoid their financial missteps. Additionally, 69 percent claimed they didn’t even know what credit scores were at the time they received their first credit card.

Future consequences

Whether or not they’ve gone to college, and whether or not they’re carrying massive amounts of student loan debts, young adults leaving home and managing their own finances are going to face a series of difficult choices. They’re also going to be required to take on responsibilities they may not be prepared for.

Taken together, those two factors lead many young adults to make decisions that seem to suit their immediate needs, but put their future needs at risk, such as:

  • Living without a clearly defined budget
  • Prioritizing wants over needs
  • Failing to create an adequate student loan repayment strategy
  • Signing up for services or utility packages they cannot afford
  • Failing to make regular, timely bill payments

Planting the seed

Financial education doesn’t need to be time-consuming or complex, but it is absolutely essential that young adults receive at least a basic education in managing their funds and utilizing credit. We make teenagers take driver’s education courses before they’re allowed to drive because no one expects them to be able to drive safely and confidently without some amount of instruction. Similarly, we shouldn’t expect young adults to make smart money choices if we don’t first show them how it’s done.

As it stands right now, when it comes to financial know-how, we’re often forced to learn as we go. And that can certainly be an effective way to learn. But a lot of lasting damage can happen on the way to figuring out how to get organized, how to set our priorities, and how to separate the right choice from the easy choice.

If you have children, make sure personal finance is part of their curriculum; if not at school, then at least at home. You don’t need to be an expert to share the lessons you’ve picked up over the years. Besides, teaching them how to read a credit report can’t be anywhere near as frightening as teaching them to drive.

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

Recommended Articles

Retired man and his dog
Take Control of Your Credit
Your credit is much too important to leave to chance. If you have questions about your credit report and credit score, consider scheduling a one-on-one credit report review.
Learn More
Learn more
  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.