Have you made mistakes with your credit in the past? This could haunt you…for a long time.
According to a Credit Karma survey, 68% of Americans make at least one major financial mistake, or “credit fumble,” before they turn 30, resulting in a negative score on their credit report.
These errors include overspending on credit cards, missing payments, defaulting on a loan or sending an account for collection, according to the survey.
The more serious the breach, the more it will reflect on your credit report, said Bethy Hardeman, senior consumer attorney at Credit Karma. In fact, it typically takes consumers seven to ten years to clear negative marks from their credit, thanks to the Fair Credit Reporting Act.
“I think what a lot of people don’t realize…is how badly a missed payment can go on your credit,” Hardeman said. “It can be a mistake that you don’t think is a big deal that can cost you thousands of dollars in the long run.”
Credit is a big factor in determining the type of loans consumers receive, as well as whether they’re approved for an apartment lease, Hardeman added.
The survey, released on Thursday, found that 3 in 4 respondents believed their credit mishaps had had a negative impact on their lives.
“These early mistakes can have a lingering impact on people’s quality of life, and we believe that with better targeted education and learning tools for new credit consumers, this cycle can be broken,” Kenneth Lin , Credit Karma founder and CEO, said in a statement.
There are many reasons a person can end up with a negative score on their credit history, but the biggest one is lack of education, Credit Karma found.
More than 50% of respondents said they received their first credit card at age 21, but 72% said they had no personal finance training before going to college.
Hardeman said consumers should know “the long-term ramifications before getting a credit card or taking out a loan.”
Consumers also need to understand how their overall credit is performing, said Sean McQuay, credit card expert at NerdWallet.
“Your credit shows how good you are at handling other people’s money, not your own,” he said.
One way for consumers to regain their credit is to apply for a secured credit card, McQuay said. “It gives you a chance to prove yourself…and over time you can apply for more traditional credit cards.”
Secured credit cards work like any other credit card. The only difference is that the cardholder must post a certain amount of money as collateral, and their line of credit will usually equal the collateral amount.
However, McQuay also said the consumer should be aware of the risks associated with secured credit cards.
You have to have cash on hand,” he said. “Even $100 can be a lot of money for someone to give.”
For the study, Credit Karma and research firm Qualtrics surveyed 1,051 American adults between the ages of 31 and 44 from late November 2014 to early 2015.