10 Ways New Graduates Are Ruining Their Credit


Most people will tell you that maintaining a great credit score is an important part of wise money management. That’s because your credit rating will always be attached to you, determining future financial purchases and decisions.

As a new college graduate, you may not know much about how credit works. Or, how some behaviors can lead to poor credit.

Here are the top 10 financial mistakes most new graduates make that ruin their credit. And, how you can avoid making them in the first place.

1. Abusing easy credit

You’ve probably received dozens of credit card opportunities in the mail.

Each offer promises the chance to apply for a variety of new credit accounts. But don’t succumb to this easy credit trap.

It’s tempting to have access to new spending limits. However, it’s far too easy to simply swipe your card to pay for purchases you can’t really afford.

Wait until you have a secure paying job and are able to manage credit responsibly before applying for multiple credit card accounts.

2. Paying bills late

Most companies associated with your household bills like electricity, cell phones, and credit cards report your monthly activity to three main credit bureaus.

That means that bills that are paid late will post onto your credit report and negatively affect your overall score. Set bill payment reminders for yourself so you don’t end up paying them late and bring down your credit score.

Maybe you don’t have enough funds to cover all your bills when they’re due. Take a minute to call up your bill provider and ask to speak to a customer representative.

Bill issuers can often help you come up with a payment plan. Or, they may even set up a new payment date that works better for your budget.

3. Becoming a co-signer

While it may seem heroic to help your friends out by co-signing for a loan or credit card account, this can be a dangerous partnership.

As a co-signer, you’re basically promising the creditor you’ll make the payments on behalf of your friend if they fail to do so. In the event this happens, your assets could be fair game as payment to cover the balance.

This time in your life is best spent working on your own financial health and managing your money wisely. Don’t get involved with helping a friend until you have a solid foundation and history of well-managed finances.

4. Playing the credit score game

Don’t believe the myth that you have to carry a balance on your credit card to establish a better credit score.

The truth is, you can build a good history of credit by simply charging a small amount to your credit card account and paying it off in full every month. Or, even paying your regular bills on time helps you build up your credit score.

There are many factors that will help you increase your credit score and become creditworthy. Therefore, there’s no need to take on unnecessary loans or carry a credit card balance.

Consistent and smart financial decisions are the key to building a good history of credit, not playing the credit score game.

5. Not having a spending plan

No one enjoys the thought of having to stick to a budget. Nonetheless, it’s an important part of being an adult.

A budget allows you to protect your financial future, achieve big goals, and prioritize what’s important to you.

If you find the word “budget” too limiting, think of it more as a spending plan. Or, as a way for you to save up for things you really want and achieve your financial goals.

Not having a plan for your money could prevent you from managing all your bills, donating to important causes, and ultimately reaching financial independence.

6. Ignoring creditors

As much as you may dislike getting emails or phone calls from creditors, it’s not a good idea to ignore them. They won’t just go away.

if you continue to avoid paying or dealing with the debt that you rightfully owe, it will go into collections. This can ding your credit score, force you to pay additional fees, and pay more interest on top of the initial balance.

If you’ve fallen into a cycle of paying bills late, or not at all, don’t ignore the situation. Contact your creditors directly and ask about your options.

Most financial institutions want to collect on their debts. So they will work with you to offer up a mutually beneficial solution.

7. Not keeping tabs on credit reports

Everyone is entitled by law to receive an annual update of their credit report from all three of the main credit bureaus through AnnualCreditReport.

Don’t make the mistake of not checking your credit report on a regular basis, especially since you can do so for free.  Small errors and big omissions alike can ruin your chances of establishing a good history of credit.

Plus, you may be able to thwart any fraudulent activity and protect your account from identity theft. By reviewing your credit report regularly, you could avoid ruining your credit altogether.

8. Mismanaging debt

Debt is not something to be taken lightly. It can have a large impact on your future and financial security.

It’s important to learn the basics of what good debt is versus bad debt, how different accounts affect your credit, and strategies you can use to pay off debt faster.

Limit your debt as much as possible. That’s because you’re essentially leveraging your future income to pay for something in the present, which is quite a risky gamble.

Keep your debt balances small and manageable so you can stay in control as much as possible.

9. Not saving for the future

As a recent college grad, it’s easy to get sidetracked with new opportunities as well as get overwhelmed with the responsibilities. But one thing you should not ignore is saving for the future.

This includes calculating how much you need to save for retirement and setting up a savings or investing plan that fits your needs.

You’ll be surprised at how quickly the years go by, so don’t fall behind on your savings goals and retirement goals. Your future self will thank you!

10. Maxing out your credit limit

A large portion of your credit score is calculated based on how high, or low, your debt utilization is.

In other words, spending the entire amount of your credit card limit on all your accounts has a negative impact on your credit history.

The goal is to only spend up to 30% of your credit limit across all accounts. This will help keep your debt more manageable while establishing a good credit rating.

Avoid these credit mistakes

Now that you understand a bit more about how certain behaviors can ruin your credit, you can use these tips to avoid future mistakes.

A good history of managing credit responsibly takes time and patience. Don’t let simple inaccuracies, errors, or mistakes undo the effort you’ve made so far.

Be proactive with your money and strive to build a trustworthy relationship with your creditors. Do your best to establish a solid reputation right out of college and you’ll be well on your way to being a responsible adult.

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