If you're in your 20s, it's likely that there's a lot of change going on in your life right now. It's possible that you've just taken your first "real" job after graduating from college. Or, maybe you're still struggling to find appropriate employment in a highly competitive field.
Whatever the case may be, your credit score may be the last thing on your mind right now. In the worst case scenario, you've already made some financial blunders that have damaged your credit. If you've maxed out credit cards and failed to make payments, this can happen pretty fast.
However, your credit is important. And you may not notice how much bad credit can negatively affect you until it's too late. So if you're a 20-something with less than perfect credit, the time to act is now. If ignored, your financial problems will only get worse until you're forced to care about them.
Why Adulting is Hard when You Have Bad Credit
Why should you care about having bad credit? In a nutshell, your low credit score might make it harder to do the following:
- Get approved for a car loan
- Rent an apartment
- Land your dream job
You may already be aware of the car loan part, but you can shrug that off knowing that you'll just pay cash for your next vehicle, right? There must be thousands of cheap cars on Craigslist. But what happens if your "bargain" ride turns out to be a lemon in need of constant, costly repairs?
And even if you're a "minimalist" who has decided to adopt a simple, non-materialistic lifestyle, it's hard to get by without a roof over your head. Unless you had a generous aunt who recently passed and left you a bungalow, you'll probably need to rent a place at some point.
The problem is that most landlords do a credit check on potential tenants. So while your quiet, pet-free self might be an ideal renter, your application may be denied. Sure, it's possible to find landlords who don't run credit checks. But the apartment that you'll get might not be ideal. You may not like the location, condition of the property or the literal skeletons in the closet. Kidding about the last part, but do you really want to take the risk?
Finally, it’s absolutely true that (in states where it's permitted) some employers run credit checks as part of the hiring process. This is especially true in any field that's connected to finance or where handling money is involved. So, if you have bad credit, you may have trouble finding a job. And that certainly won't make it easier to pay back those student loans.
How to Fix Your Bad Credit as a 20-Something
It is possible to repair your credit while you're still in your 20s, unless, of course, your 30th birthday is a few days away. But even then you can still get a good start.
The point is, the sooner you begin fixing your credit, the better. So get your plan together and get to work. Good credit is within reach, but it will take some time and effort to make it happen.
- Request copies of your credit reports and look them over for errors. You are entitled to a complimentary copy of your report from the three primary credit bureaus every 12 months. Reports from TransUnion, Equifax and Experian are available at AnnualCreditReport.com. If you spot a mistake on one of your credit reports, you can dispute the error and have the item removed.
- Create a budget and stick to it. You know what you make and how much it costs to keep up with your regular bills and expenses. So you need to make the math work out. You also need to set aside money every month to put into savings. If you find that you're constantly coming up short, you'll need to cut out certain things. These may include dining out, cable, unnecessary clothing and electronics and expensive entertainment.
- Get current with your bills. Making late payments can hurt your credit. Also, the further you get behind, the harder it will be to catch up. So use your new budget to save money to put toward overdue obligations. And once you are current with everything, get yourself on a schedule. You may even want to set up automatic payments so that you won't have to worry about forgetting a due date.Then move on to the next phase of your plan.
- Have your rent payments reported – Another thing you can do to improve your credit is have your rent or utility payments you're already making reported. Sign up for a service that reports your rent payments to get credit for this large responsibility.
Using Credit to Build Credit at Any Age
Even if you've had some trouble with credit in the past, this doesn't mean that you should avoid using credit altogether. The only way to build a good credit history is to borrow money (via credit card or loan) and pay it back on time.
A popular option for those who are getting back into the credit game is the secured credit card. To open this type of account, you'll need to put up a cash deposit. The amount of this deposit will become your spending limit. Then you can use the card to make purchases and payments, and gradually build a good credit rating.
Another option is to purchase your next vehicle with a bad credit car loan. There are special finance lenders out there who are able to look at factors beyond your credit in order to approve you. Then, after you buy your car, you can boost your credit score by making timely payments.
If you do need a vehicle and you want to rebuild your credit, Auto Credit Express can help. We can match you with a dealership in your area that's connected to special finance lenders. Our service is fast, costs nothing and is obligation-free. This means that you have nothing to lose, except your bad credit and endless requests to borrow your roommate's car.
Go ahead and fill out our simple and secure online application to get started today.