Why you need a good credit score and how you're messing it up

Here's how to boost your credit score
Here's how to boost your credit score

Your credit score. It's the magic three-digit number that offers you access to a world of opportunity, like renting a fabulous apartment, or snagging a cheaper rate on a home mortgage or a car loan.

Yet one in five Millennials have never even checked their credit score, according to new data by LendEDU, an online marketplace for student loan refinancing.

But if you're not planning on making any major purchases, do you really need good credit?

Most people are familiar with the notion of presenting your credit score when you lease a car or rent an apartment. But everything from your deposit requirements set by utility companies to the premium you pay for your insurance can be affected by your credit score, according to Jeff Richardson, a credit expert at VantageScore.

"A low credit score can mean the difference of thousands and thousands of dollars," says Richardson.

Here are three ways you may be really mismanaging your credit:

1. Getting sloppy with contracts

You're nearing the end of a car or apartment lease, and the end is in sight. But forgetting to pay that final utility bill before moving, or defaulting on your apartment lease, can land your credit score in hot water, says John Ulzheimer, a credit expert at The Ulzheimer Group.

"Not paying final utility bills is a particularly important to be wary of since young people tend to be more nomadic than older people," he says.

You can also end up with a lower credit score by running up excessive mileage on a car lease or failing to pay for damage to an automobile or an apartment.

Related: Your 3 biggest financial fears -- and how to avoid them

"These are the terms that are often overlooked by younger credit users and jump up to bite them in the form of a large lump sum required payment," he says.

2. Overdoing it with credit card applications

It can be tempting to apply for retail credit cards to save some money on your shopping purchases, but failing to space out applications can temporarily damage your credit score, according to Ulzheimer.

He notes that young people should be particularly cautious over the holidays, when many retailers urge people to take advantage of big discounts for holiday sales.

Every time you apply, the creditor will run a credit check before they approve you for a new card.

Not only are the credit checks a temporary drag on your score, but opening new cards can drag down the average age of your credit history, another factor that weighs on your score.

"[Retail cards] result in several new credit inquiries and new accounts, and both of those can hurt your credit scores," he says.

3. Avoiding credit altogether

These days, it feels increasingly easier to avoid using credit cards. Apple Pay, Paypal, Venmo and prepaid debit cards have vastly changed the way people make financial transactions.

Related: 3 myths that could tank your credit score

"Back in the day there were very little options outside of a general use credit card," says Richardson.

Today, however, young people can't even access credit cards until they have proof of income, as a result of the Credit Card Act of 2009. That is causing many people to delay building their credit score -- a mistake that may haunt them as they try to make larger purchases later in life, according to Richardson.

"Unless you're going to write a check to buy a car or house, you're going to need some sort of credit," he says. "Credit avoidance is simply not credit management."

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