The Importance of Building Good Credit in Your 20s


When you’re a carefree twenty-something with few financial responsibilities, building good credit may be the last thing on your mind. You may think you will not have to worry about your credit score until you start thinking about making large financial decisions like buying a home, but it takes a long time to fix a bad score. Planning ahead is the best way to ensure your ability to make these large purchases in the future.

Forbes contributor Alexandra Talty spoke with finance experts about why it is vital to build good credit in your twenties. Chris Young, a principal at financial planning company Cassaday & Company told her that a bad credit score in your twenties could drastically affect your future.

“It’s imperative to understand that an ‘I’ll fix it later strategy’ is not a good one and it could significantly impact your quality of life in the future,” Young said. “Fixing a credit score can be a tedious process and can prolong your goals and dreams.”

LaTisha Styles, founder of financial education site Young Finances, explained to Talty that most young adults are perfectly capable of maintaining a good credit score. Mistakes are often made from disorganization rather than an inability to pay. In addition, many young people simply lack the knowledge of what factors can make or break a credit score. Educating yourself on how to build good credit is the first step to actually doing it. As U.S. News and World Report emphasized, this is the only time in your life you have a completely clean credit slate. It is your one and only chance to start from scratch, and it is important to seize that opportunity by being as financially responsible as possible.

How to build good credit in your twenties

The number one way to build good credit is to make your credit card payments on time, as we mentioned in this previous blog post. Late payments can severely hurt your score, so make sure not to overspend. Even more, make sure you remember to make the payments. Set reminders or set up automatic payments. You don’t want to hurt your score by simply forgetting to make a payment.

Liz Weston, author of “Deal with your Debt: from What You Owe” told consumer advice website Clark Howard that young adults should spend as if they are broke college students for a little while after starting their first jobs. Doing so will help you build up savings and figure out about how much you will need to spend per month on necessities.

Lexington Law Firm suggests regularly checking your credit report. Not only will this help you realize how your actions can result in an increase or decrease to your score, but it will also help you catch any errors or signs of fraud. As explained by the Federal Trade Commission, each of the three major credit bureaus is required by the Fair Credit Reporting Act to give you one free credit report per year.

In the end, it is all about being smart, organized and responsible. Don’t buy things you can’t afford and make your payments and pay off your loans on time. Clark Howard did say, however, that one type of debt you shouldn’t focus on paying off too quickly is your student loans because they generally have low interest rates. While you should do what you can to make those payments on time, it might be better to focus on building up savings, saving for retirement and paying off other debt.

Related Articles:

Why Millennials Should Start Thinking About Retirement Now

Surprising and Interesting Views Millennials Have Regarding Credit

3 Ways to Help Your Children Build Credit