For many of us, the day we’re finally allowed to send off an official-looking form and get back a small rectangle in the post, is a day of massive celebration. This tiny piece of plastic is a passport to fun: to big purchases like holidays, the latest tech and catwalk trends (*starts daydreaming…*).
But what many of us don’t immediately think about is, well, how we’re going to pay that money back. Buying on credit doesn’t seem like we’re using real money, but our credit scores are one of the most important things we’ll ever have. A good credit score is the difference between getting a mortgage in the future or not (lenders need to know you will repay it), getting a loan with a lower interest rate, or even getting a job (some employers, especially in government or financial sectors, run credit checks on prospective employees).
And worryingly, a lot of us are destroying our credit scores without even realising. Online credit score provider, My Credit Monitor, has identified a generation of the population – The Debt Set – the under 30s who are unwittingly making common mistakes which affect their rating. Not sure what those kinds of mistakes are? Take their quiz: https://www.mycreditmonitor.co.uk/credit-score-quiz#/ It identifies the biggest ones, including maxing out your credit card, or spreading a purchase over several cards.
My Credit Monitor also ran a survey of 1000 people which found some interesting statistics; firstly, that a whopping 75% of under-30s had no idea what their credit score was before they had their first ever credit card. But that didn’t stop nearly a fifth of them (17.4%) paying for a holiday – which can run into hundreds of pounds – using a credit card, or a loan. And, when they ran into problems paying it back, over 20% had to move back in with their parents to help clear their debts… But it’s a long, hard slog to being debt-free; 17.5% of over-30s are still paying back money they spent in their teens and 20s! Perhaps unsurprisingly, then, 84% of 18-65 year olds think we should be taught about personal finance while we’re still at school.
“It’s clear that young people don’t get enough education about one of the most important factors they’re going to have to deal with when they reach independence: money,” agrees Sati Dhanjal, Vice President at My Credit Monitor. “Things are hard enough for them, what with lack of jobs and the recession, without adding things like credit card debt into the mix.”
So here are eight tips for the under-30s from My Credit Monitor
- Make sure you are registered to vote!
- Close inactive accounts
- Check your credit score on an on-going basis-it can always be worked on and improved
- See if your lender offers a soft credit search to quickly check your credit score without hampering your current score. Hard credit checks such as those done by credit card providers, banks and mortgage providers can give a bad impression if multiple checks are done
- Do your homework before applying for credit; don’t be tempted to apply for all the offers you are sent, or the most obvious providers in the market. Just because you’re getting marketed to, doesn’t mean they will accept you.
- Don’t assume small debts are less of a problem; demonstrating that you can’t handle even small amounts of credit such as a couple of pounds is just as damaging.
- Don’t assume that the banks and credit agencies always get it right; you should regularly check your credit report to make sure there are no mistakes on there.
- It’s not just loans and credit cards: energy, and broadband providers, for example, can also contribute info to your credit report.