Approximately 60 percent of adults have not reviewed their credit report in the past 12 months.
The 2014 Consumer Financial Literacy Survey conducted by the National Foundation for Credit Counseling also found that 65 percent of adults haven’t even checked their credit score in that same time period.
Most college students and young adults simply do not think about the consequences of missing even one due date on credit cards or blowing off the electric bill for party money. Granted, students who have taken business law and ethics courses are more knowledgeable about credit and how it can influence future buying power, but the vast majority ignore the impact credit for young adults has on so many aspects of life, besides buying houses and cars.
A 2012 study by the Insurance Institute for Highway Safety found that drivers under age 20 are 3 times more likely to be involved in a fatal car accident than all other age groups. Age, coupled with overall lack of driving experience, are the primary reasons car insurance is so much more expensive for teenagers than anybody else. Youth and a bad credit score can make the premiums even higher.
CarInsurance.com found in a online survey last year that customers with 750 or higher credit scores paid $783 less in yearly premiums than drivers in the same age group with below average credit. Drivers in California, Hawaii, and Massachusetts are unaffected, however, because those states ban the use of credit to determine premiums.
Young drivers who exercise due diligence and compare auto insurance rates before buying are ahead of the curve. But one late payment on a credit card during your freshman year in college can come back and haunt you when insuring the new wheels you buy after graduation.
Some 47 percent of employers factor in credit scores when making final hiring decisions, the Society of Human Resource Management found in a 2012 survey. The primary reasons cited by companies for conducting pre-employment credit checks was to prevent fraud and reduce liability as a result of negligent hiring practices. But a study by public policy organization Demos found that positions such as ice cream store clerk and telephone customer support personnel were subject to credit checks, as well.
The good news is that several members of Congress believe the practice is unfair and have introduced legislation to ban it. But we’re talking about the U.S. Congress, so don’t expect resolution on this issue anytime soon.
Love and Marriage
Conventional wisdom says most people simply want a loving, loyal spouse when looking for a life partner. But a survey by Experian this year found that financial responsibility trumped both physical attractiveness and career ambition when it came to choosing a husband or wife.
Manisha Thakor, the CEO of MoneyZen Wealth Management, told the New York Times that bad credit rated up there with sexually transmitted disease as a deal breaker for marriage. Further, frequent arguments about money and finance are a top predictor of divorce, according to a 2012 study published in the journal Family Relations.
As a Financial Counselor, I have worked with the family law courts and many divorcing couples for many years. I continue to see how financial and credit issues can ruin a marriage.
Good credit for young adults is important. It may not seem so important while young, but practicing good financial habits early will lead to a more fulfilling, stable life in the future. Think about that next time you mindlessly bounce a check for a couple of pizzas.