How New Grads Can Protect Their Credit

By Dan Rafter on 30 May 2018 0 comments

The years right after graduating from college can be stressful ones. It's time to find a job. You might be looking for a new place to live. You're starting the transition from college student to adult. It can be easy to get overwhelmed, and it can be just as easy to make serious financial mistakes that damage your credit.

What things can you do to protect your credit after graduating from college? Here are some of the big ones.

Never pay a bill late

It can be easy to miss a bill payment, especially when you're not used to having a lot of bills to pay. Mail can pile up while you're adjusting to a whole new way of life. Prioritize getting organized with your bills. Sign up for autopay or set up reminder alerts. Put your bills in a place where you can see them so they don't get buried under other junk or unread mail. Not only will late payments eat into your new budget with fees, but your credit will take a big hit. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)

Not all late payments are reported to the credit bureaus, and some late payments don't impact your credit score. The big ones, however — credit cards, mortgage, auto loans, personal loans, and student loans — are reported. A single late payment of one of these major bills could cause your score to tumble by 100 points or more. That late payment will also stay in your credit reports for up to seven years. (See also: How Late Payments Affect Your Credit)

You should know the official definition of a late payment. A payment is only reported as late to the credit bureaus if you are 30 days or more past the due date. So even if your payment is two weeks late, you can avoid a hit to your credit by immediately making a payment. (See also: Pay These 6 Bills First When Money Is Tight)

Don't ignore the bills that don't get reported

There's a big caveat to the payments that don't get reported to the credit bureaus. If you're late with a doctor's bill, utility payment, rent payment, or cellphone bill, the three credit bureaus won't know about it unless those payments are sent to a collections agency in effort to get you to pay what you owe. When that happens, your credit score can again plummet by 100 points or more.

It isn't just collections you should be worried about if you fail to make rent payments, either. If your landlord evicts you, that won't show up on your credit reports. But if your landlord sues you for breaking your lease, and that ends in a civil judgment against you, your credit will take another hit. Civil judgments are reported to the credit bureaus and stay on your reports for up to seven years. (See also: 10 Surprising Ways to Negatively Affect Your Credit Score)

Those monthly payments can be overwhelming, but it's important that you pay them, and do so on time. You might have to cut down on your discretionary spending, move back home, or take other steps to make sure that you are keeping current with your bills.

Seek help for student loans if you can't afford the payment

The average 2017 graduate left college with $39,400 in student loan debt, according to Student Loan Hero. That's a staggering amount of debt for anyone, let alone a young adult who is just getting their footing in the world. When your student loan payment comes due, it's important that it gets paid. Otherwise, you risk defaulting on that loan, which will issue a blow to your credit. (See also: What Really Happens When You Don't Pay Your Student Loans)

If you are struggling to come up with your monthly student loan payment, be proactive in finding ways to alleviate the financial burden. You may have the option to consolidate multiple loans, defer the payments, or speak directly with your lender about how to make your repayment plan work better for you. You will likely have more options with federal student loans than private ones, but you should still do your research. (See also: 8 Surprising Ways to Pay Off Your Student Loans)

Don't run up your credit card debt

It can be easy to rely heavily on credit cards when money is tight. When you're young and your paychecks are small, this can be an even bigger temptation. This, though, can also wreck your credit.

Racking up too much credit card debt will lower your credit score and leave you with a financial burden that's difficult to overcome. The high interest will pile on until you're struggling to keep up with payments. Lenders view consumers with too much credit card debt as a high risk for missed payments, and often deny them other forms of financing. It's a dangerous cycle that many young adults can easily fall into.

Resist the temptation to use your credit card to purchase restaurant meals, movie tickets, electronics, or concert tickets. If you can't afford these goodies in cash, you can't afford them with credit. (See also: The Millennials Guide to Avoiding Credit Card Debt)

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