Building and maintaining a great credit score is a way to take advantage of lower interest rates, mortgage rates, and additional financial opportunities that are otherwise unavailable. As a millennial, credit building may seem challenging or nearly impossible, depending on your current position and take home income. With the right steps, make the moves necessary to drastically increase your credit score in as little time as possible.
Regularly Monitor Your Credit Score Reports
One of the most important elements of building an excellent credit score involves the regular monitoring of your annual credit reports. Using a website such as CreditKarma.com, check your credit score regularly to discover potential issues, late payments, or inconsistencies that need addressing. Use an online credit report company to keep track of current debts to your name while also taking advantage of digital applications for secured credit cards and lines of credits you personally qualify for, based on your credit score.
Review Your Credit Report for Mistakes
Unfortunately, not all credit reports are accurate for the millions of individuals who receive them each year. From 2012 to 2016, the Consumer Financial Protection Bureau received more than 147,000 complaints, 77% of which were in direct relation to incorrect information posted on credit score reports.
Take the time to review your credit report in its entirety, making note of any potential errors that may appear on your report or any debts you have already paid. Oftentimes, credit report websites provide the option to directly contact creditors and debtors individually to help alleviate the stress of lowering the debt you have to your name.
Use a Banking and Spending App to Track Your Financial Health
As a millennial, it is not atypical to have a smartphone on your person at all times. Consider downloading a banking and spending app such as Mint to better track your finances and how you spend your take-home income each month. Use downloadable budget and personal finance apps to gain valuable insight into your current spending habits and where you are spending your money most frivolously. Cut back on ordering take out or shopping for unnecessary items if you currently have little or no credit to your name. Instead, save the money required to choose a secured credit card you qualify for based on your credit score and any debts you have.
Taking control of your finances is one of the most important aspects of building good credit, regardless of your annual earnings and the disposable income you bring home each week. The more control you maintain over your finances, the less likely you are to find yourself stuck with credit card or loan debts as you continue to take on additional lines of credit. When you use a financial tracking app, feel comfortable with and confident in the spending decisions you make each day without putting your financial stability at risk.
Apply for a Secured Credit Card
When you have a poor credit score or no credit score to your name, apply for a secured credit at your preferred banking institution or by using a credit report company of your choice online. Secured credit cards require individuals to pay a set amount, often ranging from $250 to $500 in order to obtain the card. The card can then be used up to the paid amount each month as a way to help individuals make credit payments, steadily boosting credit their score. Using a secured credit card is one of the quickest ways to build a credit score. It is important to note that paying off any and all debts you have to your name (listed on your credit report) is necessary before reaping the benefits of a secured credit card.
Pay All Bills on Time
It is imperative to pay all of the bills you have in your name on time each month. If you find yourself in the habit of paying off bills late, you run the risk of receiving a negative mark on your credit report. Creditors and companies can report individuals for repeated late payments if you are not currently in good standing with the company. Paying your utility and service bills on time each month helps prevent negative marks or the lowering of your credit score on your report each month.
Ask Creditors to Remove Late Payments
In many cases, working directly with creditors and debtors can help alleviate any marks or issues on your credit report due to late payments. If you have been with a company for years and have previously made all of your payments on time, it is possible to send a letter of good intentions to have the derogatory remark removed from your credit report altogether. While it is not always possible to negotiate with companies and service providers, many businesses prefer to keep customers rather than to turn them away, prompting them to put more effort into alleviating your financial stress.
Settle Current Debts as Quickly as Possible
Racking up debt is not unusual, especially when you have access to multiple credit cards and ever-expanding lines of credit. However, it is important to focus on paying off any debts you have in your name before you attempt to begin building or repairing your current credit score. Even if you are making your current payments on time but you have a debt to your name, it is essential to hone in on remedying your debts to prevent your credit score from being stuck. When you are adamant about alleviating the debts you have to your name, it becomes much easier to build and boost your credit score at will with full payments and paying all of your bills and debts owed on time.
While building an excellent credit score as a millennial is not often possible overnight, it is possible with a thorough understanding of how the credit system works. With a few lifestyle changes and consistent monitoring of your credit reports, build a credit score that works in your favor whether you are interested in buying your first home or applying for a personal loan.