27
Mar

Many college students are often able to get credit cards in their own name, whether they do it by themselves or with the help of a co-signer. But those who are able to do so will likely need to be careful in dealing with these accounts to avoid racking up significant debts and putting their good credit scores in any sort of peril.

It's not uncommon for young adults to mishandle their new credit cards simply because they have a limited borrowing history, but those who do also likely put their borrowing future at risk when they do. Compiling large balances can lead to a number of problems dealing with credit in general, both in terms of immediate finances and overall standing. As such, it's vital that college kids keep their spending under control as much as they possibly can while simultaneously working to deal with any mistakes they might have made in the past as reasonably and responsibly as possible.

The most common credit mistakes by young adults
In general, there are two major missteps younger borrowers make when dealing with their credit card accounts that will put them in greater danger of requiring credit repair in the future, and often they come along simply because these people don't have a lot of experience in dealing with accounts of this type. Often, college students will have credit accounts such as education or auto loans in their names, but the way these can be used differs widely from credit cards, though they can have similar impacts on credit standing in some ways.

Perhaps the most common mistake younger borrowers make when dealing with credit card accounts for the first time is that they simply end up not keeping close tabs on how much they're spending on the cards every month, and end up carrying more debt than they should. There are two general ways to define what constitutes too much debt. First, and perhaps most important to a young person, is whether they can afford to make the monthly payments necessary into that debt given the minimum payment listed on the bill, which itself is determined by how sizable the debt is. If balances start growing so large that it's difficult for the borrower to even meet the minimum requirement, it might be time to reassess the new spending habits that account has afforded.

Second, and more important to a borrower's credit future, is whether the balance exceeds 30 percent of their total overall credit limits. This is true because a full 30 percent of a person's credit score is made up of this factor, which is formally known as a borrower's "credit utilization ratio." Contrary to popular belief, lenders like to see borrowers who can keep their debts as low as possible, and those hoping to max out this part of their score will need to keep their balances below that 30 percent threshold to do so.

The other common mistake goes back, in part, to not being able to afford to pay monthly bills. Any deadline that's missed for any reason, whether it's an inability to afford minimums or simply because people forget to send in their payments on time, will have a huge negative impact on those borrowers' scores. It doesn't matter if the deadline was missed by a day or a month, or the payment fell short of minimums by $1 or $100. In all, payment history makes up another 35 percent of a person's score, and any mistake made in getting them in on time and in full will result in a person's rating taking a significant tumble. One way to make up for such a misstep is by making several months' worth of on-time payments in a row, to prove to lenders that the missed deadline was an isolated incident rather than a sign that a borrower is going to have more such difficulties in the future, as well as working with a credit repair company to help correct the negative marks on the credit report.

Getting back on track
It may be wise for younger people with credit cards to simply put them away in a drawer for a while and not use them once the balance is reduced to zero. In doing so, they will continue to build their credit history without having to worry about the damage any additional debt will do to their finances until they establish a little more independence for themselves and are sure they're able to handle the occasional difficulties that might come with borrowing in general.

Young adults who are graduating from college in the near future might want to take the time to order copies of their credit reports as well. By doing so, they may be able to identify any potentially unfair markings listed on the documents. Working with a credit repair company may be helpful in remediating these issues going forward.


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