Millennials know a good credit score is vital to financial well-being in the modern world. However, it takes time, attention, and effort to get and maintain the loans and credit cards that will help millennials grow their credit.
Having strong credit can make it easier to get a car loan, mortgage, an apartment and even some jobs. Because lenders use your credit score to help assess your reliability as a borrower, a high credit score can help you qualify for lower loan interest rates and you will save money over the course of your lifetime.
With student loans, entry-level jobs, and the cost of living at an all-time high, it can be challenging to prioritize building credit as a millennial.
By taking these reasonable simple steps, millennials can build their credit rapidly and escape the cycle.
Find out your current credit score..You can obtain a free credit report from the three CRCs, TransUnion, Experian and Equifax, every 12 months. You should make a habit of getting yours annually for several reasons. You should want to review your report for poor reporting, identity theft, or any other factors that make your credit look worse than it should be. If you find something, contact the credit bureaus directly and begin the process of having those errors removed. Doing this can also help you manage, monitor and protect your credit.
Apply for a credit card.. If you’re starting to build credit, credit cards can speed up the process if used responsibly. Credit card companies report your payment history to the credit bureaus, which helps to establish a credit history. It’s important to use your credit card responsibly by making on-time payments and keeping your credit utilization ratio low. One way to use your credit card to build credit is to charge everyday purchases like gas and groceries and then make regular monthly payments. This will help create a positive credit history and build your credit score over time.
Pay Bills on Time.. Automate bill payments if you can’t remember or aren’t punctual. Payment history, namely the consistency of making payments on debts, comprises 35% of how your credit score is determined. Payments on everyday bills, like utilities and credit cards, are reported to credit bureaus. You can really make this system work to your advantage by paying your bills consistently on-time.
Don’t apply for new credit too often.. When you apply for new credit, the lender has to request your credit report or credit score, and that places a hard inquiry on your credit report. Having too many hard credit inquiries on your credit report may hamper your credit score, as it may signal you are having trouble paying your bills or are overspending. Take a year off from applying for credit. Spend those months polishing your rating, making existing payments diligently, and paying down any credit card balances. At the end of the year, get back in the game with a much higher score and far better chances of getting the loans or cards you need.
