Credit can be either a blessing or a curse for a young person in this economy. College graduates who are lucky enough to land a job are faced with rent, utilities, groceries, car loans, and payments for credit cards and student loans. Some stretch their income to cover all of these, only to be laid off from work in six months or a year.
During unemployment, bill payment must be prioritized. Rent, student loans, and utilities take the top spots. Credit card bills become less important because they can be paid late. The young cardholder justifies the late payment fee as a small drawback during difficult times. Once a new job is found, timely payments will resume.
A major issue with this perspective is that the credit rating may determine whether the person is qualified for a job. Media outlets report that an increasing number of companies are factoring applicant credit reports into the candidate screening process. Higher loan default rates have led credit scores to decline nationally. There is nearly $830 billion in U.S. student loan principal outstanding, exclipsing credit card debt.
Failure to repay credit card balances can affect the credit score. When cash dwindles and government loans cannot be repaid, things get much worse. Delinquent student loans send credit scores into a freefall. In September, U.S. unemployment was 9.1 percent, creating a very bad situation, especially for young professionals finding themselves without a job.
The simple act of falling behind on a credit card payment due to unemployment can cause the credit score to decline. The individual may then be unable to get a job due to the low credit score. This can force some young people to turn to credit card cash advances to pay bills, which only increases the card balance. When student loan payments are interrupted, the situation worsens.
