5 Ways for Millennials to Drastically Improve Their Credit Scores

Whether it’s their spending habits, work preferences or general outlook on life, it seems like everyone’s talking about millennials these days. Lately, reports have indicated these young adults – aged 19 to 34 – have worse credit scores than their older counterparts. While this is partly due to less established credit histories – which will take time to correct – there are steps millennials can take to improve their credit in relatively short order.

Know Your Credit Score

Knowledge is power, and if you don’t know what your credit report looks like then it’s time to correct that situation. Keeping tabs on your report can give early warning for possible fraudulent activity as well as any misrepresentation of payment histories. Catching these sorts of things early on is key to keeping your credit score healthy.

Avoid Late Payments

This simple step should be common knowledge, but it’s worth repeating that it is extremely beneficial to pay your bills on time. Keeping these obligations organized and current is an easy way to keep you in the good graces of your creditors and improve your credit score. Late payments can pile up and quickly impact your score, not to mention the endless calls from lenders you’ll have to endure.

The Silver Lining of Student Loans

Millennial student loan debt is staggering, far surpassing prior generations. The implications for the millennial generation’s ability to fully participate in the economy notwithstanding, this massive collection of debt can have a positive impact on credit. Keeping up with these payments is not always easy, so it’s important to budget monthly income to ensure there’s enough left over.

Establishing a track record this way can provide a nice boost to your credit score, and help you maintain financial discipline. Again, it’s important to remember that late payments can adversely affect your credit score, so if making payments starts to become a problem it’s best to call your lender early on to discuss alternative repayment options.

Be Smart With Credit Cards

It’s a basic concept: carrying over credit card balances from month-to-month costs you money. It’s easy to forget that it can also hurt your credit. The balance on your credit card as percentage of your credit limit is called utilization, and it is one of the major factors used to calculate your credit score. The obvious solution here is to charge less to your credit cards; however, increasing your credit limit and adding a new card to your overall credit capacity will also help lower your relative credit usage.

Keep Credit Cards Active

It’s great that you’ve paid off your credit card balance and are disciplined enough to keep to a budget and avoid new charges, but that doesn’t mean that an unused credit card is useless. As long as there aren’t any annual fees, it’s worthwhile to keep that card around as it gives you more credit capacity that you’re not using – something lenders love to see. This is just one of a number of things that you can do over time to build the necessary credit score for buying a home or taking out a small business loan to keep the economy (and your personal economy) moving.

That millennials lag behind their older counterparts in terms of creditworthiness is a fact, but that doesn’t mean it can’t change. Just remember that time can heal all wounds, and by adopting smart spending habits and becoming wiser consumers, you can achieve fiscal responsibility and improve your credit score.