The Importance of Understanding Credit Scores Early in Adulthood
- On the Money Magazine
- Jul 16
- 2 min read
Riaan Srivastava, Whitney M. Young, Fall 2024
A credit score is a major part of most people’s financial lives. As teens become young adults and are eligible to have their own credit cards and manage their credit scores, the question arises: Do they know how to manage it? Understanding and managing a credit score early in adulthood lays the foundation for a lifetime of financial stability and opportunities. This effort enables young adults to secure better loan terms, access favorable interest rates, and build a strong financial reputation, making the long-term benefits a worthwhile investment.
Many people have credit scores, but there is a wide variation in their quality. A credit score, which ranges from 300 to 850, indicates how trustworthy an individual is when borrowing loans or applying for jobs. According to LendingTree, 28.7% of the US population struggles with managing credit scores, making them less likely to secure loans and mortgages (Papandrea, 2024).
Education plays a crucial role in understanding and managing credit scores. Paddy Patel, a Business Analyst for TransUnion, notes, "A lot of people don't know basic steps of maintaining a good credit score. Following simple steps goes a long way in maintaining a good credit score." Avoiding common pitfalls, such as not paying bills on time and spending above the credit limit, can significantly damage one's credit score.
Business consultant Raj Sahay also emphasizes the importance of young adults learning about credit scores. He states, "Learning about credit scores is important. There are many uses, and I feel that if young teens know more about this, the better they are prepared for the future." Having a good credit score not only makes one eligible for a secure financial future, marked by better loan terms, favorable interest rates, and a better financial reputation. Encouragingly, according to WalletHub, 46% of Americans have a very good or excellent credit score, such as 740-850 (McCann, 2024). With the right management, you can be part of this group.
Learning and understanding how to manage credit scores is essential for young adults and teens as it provides numerous lifelong benefits. Proper credit management sets the stage for more financial opportunities. By grasping these fundamentals early, young adults can ensure that they are well-prepared to navigate the financial challenges of adulthood.
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