Millennials who have plans on becoming a homeowner in a couple of years from now should work hard to improve their credit scores. While credit score provider FICO recently revealed that the median score is now pegged at 706, most millennials only have an average score of 668, which means many have “poor credit.” There are easy ways millennials can do to start improving their credit scores.
Your payment history and the amount you owe are two of the biggest factors that affect your credit score. If you’ve become delinquent in making credit card payments, here are easy ways you can do to start raising your credit score.
- Pay bills immediately – The way you pay your bills greatly affects your credit score. Paying any balances on time prevents you from having to pay high-interest rates from late payments. Some people consider getting part-time jobs to increase their income needed to pay off debt.
- Use credit card constantly – Keep your credit card account active by using it on your next vacation. Completely avoiding credit card use could bring a negative effect on your score. Consider swiping it once every six months and make sure to pay off any balance on time.
- Consider a basic credit card – If you’re either improving or just starting to build your credit score, it is advisable to apply for a basic credit card based on your spending capacity. Some people consider applying for their second card as their credit score improves.
- Take a personal loan – A personal loan is worth considering if you want to totally avoid credit card use. Taking a personal loan allows you to monitor your daily expenses as you spend cash while at the same time it builds up your credit score as you make loan payments on time.
- Check credit reports regularly – Always check the free credit report copy you get every year. Nowadays, more people complain of errors in their credit report that affects their capacity to take a loan. The Consumer Information of the Federal Trade Commission has provided steps in disputing errors on credit reports if you find any discrepancies in your credit information.
Having a good credit score is ideal if you have saved enough funds for your dream home’s down payment and closing costs. Lenders offer competitive interest rates to borrowers who have excellent credit scores.
Credit card debts burden millennials even more
A recent CNBC report revealed that a significant percentage of millennials are burdened with credit card debt on top of the student loans they took. Early this year, Experian said that millennials have an average debt of $80,666. That’s 11% higher compared to the recorded $72,988 average debt in 2017. Compared with other generations, people whose age is within the 23-38 years old bracket has the lowest median credit scores.
Millennials, especially those who dream of a suburb living together with their own family, should start working to have an ideal credit score that will attract potential lenders. Borrowers who have a good credit score can negotiate a loan with a lower interest rate.
Having a good credit score generally means that you are effective in managing your finances by keeping your debt to a minimum and paying off the balance on time. People who have good credit scores usually pay fewer interests when taking a mortgage compared to those who have poor credit scores. It takes significant time to build or improve your credit score. You can use the ideas mentioned above to raise your credit score.