5 mistakes millennials make when it comes to credit
If you’re a millennial, you’ve probably heard enough of grumpy Baby Boomers and Gen Xers grumbling about how lazy the kids are these days or how the younger generation doesn’t have a work ethic or has a sense of entitlement.
Yes it’s true the older generations, who grew up at a time when college cost a fraction of what it costs today and renting an apartment in the cool part of the city didn’t drain two paychecks, love to talk about how easy young people have it.
With rising home prices and huge student loans, it can be hard for millennials to get a financial foothold in this world. Credit is widely available, and if used wisely, can be a tremendous help.
As a leader in creating credit scoring models and educating consumers, VantageScore Solutions understands that too often young people don’t know how to properly use credit. To help, they’ve come up with a list of some of the biggest mistakes others have made, so you can avoid them.
1. THINKING CREDIT IS THE SAME AS CASH
Everyone knows the $4,000 line of credit on your credit card isn’t the same as cash, but something happens when people see they can spend $4,000. All sorts of goodies and toys start dancing around their thoughts. New clothes, sweet vacations, etc. Don’t succumb to temptation! The momentary thrill of having high purchasing power can lead to years of struggling with debt and lower your credit score.
2. NOT BEING AWARE OF YOUR CREDIT SCORE
For many, a credit score is a nebulous, abstract thing they never check. If you’re not in the market for a home or new car, why bother? First, your credit score can impact all parts of life, from apartment rentals to cellphone contracts. Second, knowing your score can help ensure you’re on the right course: When you do need to make a big purchase, you’ll be ready.
3. OPENING CREDIT CARDS JUST FOR THE REWARDS
How many times has a store employee told you about all the benefits of opening the store’s credit card? Sometimes you get five percent even 10 percent off all in-store purchases, plus great year-end rewards. As tempting as these offers are, store credit cards usually have high interest rates, plus, opening and closing multiple credit cards can temporarily cause your credit score to decline.
4. CREDIT CAN BE USED FOR ANYTHING
Is your Instagram feed filled with friends on spring break, hiking the Rockies or sleeping in a hammock strung up between two palm trees? This probably makes you a bit jealous. Don’t make the disastrous mistake of thinking your student loans or other specific forms of credit can be used on vacations or other luxuries. Save up for these things, be smart with your money and in time, you’ll get there.
5. BEING CREDIT-SHY
We’ve covered some reckless behavior, but what if you’re uber-responsible, know the perils of credit and pay for everything with cash or check? When you’re ready to establish credit, open a credit card, use it sparingly and pay it off in full each month. Credit scores are partially based on how responsibly you can use credit. If you show you’re able to handle debt and pay it off regularly, using a credit card can actually boost your score.