A survey commissioned by Discover found that 46 percent of millennials associate their credit score with their self-worth. Another 64 percent said that a higher credit score contributes to their sense of freedom.
With apparently so much riding on having a good credit score, one might assume young adults are generally doing well. But, according to data collected by TransUnion, this may not be the case. Close to 43 percent of millennials have subprime credit. Additionally, the typical millennial has a relatively low credit limit, and is using nearly 80 percent of their available credit.
Based on this information, it’s clear that many young adults could stand to clean up their credit a bit. And, based on Discover’s findings, they already have the motivation to do so. But motivation is only one helpful catalyst in improving one’s credit.
If you’re making an effort to up your credit score, consider adopting these habits:
Triple check your score
Some people habitually check their scores and know exactly what they are. Others check them every so often, while some never check it at all. Discover found that about three-fourths of regular checkers – those who check their scores seven or more times per year – saw increases in their score over the course of the year. Conversely, only 44 percent of people who only took a look at their score once in a year said the same thing.
Perhaps the reason for this is because people who religiously check their scores may be actively working to increase their score. The fact that they’re checking it that often could just be indicative of their dedication to its improvement.
However, simply making yourself aware of where you stand could be one method to encourage future changes, The Street reported.
“The greater the awareness of your score and the greater the awareness of what impacts your score, the more a consumer can stay on top of their credit and the more they can take those positive actions that will help them in all these aspects,” Laks Vasudevan, Discover’s vice president of products & innovation, told The Street.
If you haven’t looked up your score recently, now might be the perfect time to do so. The three credit reporting bureaus – TransUnion, Experian and Equifax – can give consumers one free credit report per year. Plus, there are plenty of online resources that allow consumers to take a look at their score.
Never, ever miss a payment
The biggest component in your credit score calculation is payment history. Just one late payment can bring down your credit score. And, if you have a higher score with no late payments to begin with, missing a due date could have a bigger impact than if you’re habitually tardy in your payments, according to Equifax.
The solution here isn’t to make a late payment every once in a while to soften the blow of a mistake. Rather, it’s to make sure you never let a payment deadline slip past you. Many times, there’s a simple solution to helping you achieve payment perfection: automated transactions. Many bills make it possible to set up an automatic withdrawal from the bank account of your choice, allowing you to carry on with your life without worrying when the heating bill is due.
However, there is some risk in doing this. Should your bank account drop below the amount you need to cover your monthly expenses, you could wind up with fees from your bank or from the company you’re paying. To avoid this, regularly check the account balance, keep track of how much your bills are every month and ensure there’s enough to cover everything. It’s even better if you have a cushion, just in case a bill is unusually high one month.
While this trick should work for many of your financial responsibilities, there might also be a few organizations that don’t have this capability. If, say, your water bill needs to be paid in person or through the mail, set up a calendar alert a few days before its due. This way, you’ll give yourself time to make sure that check gets to where it needs to go.
Watch your credit card bill
Using your credit card is a good idea if you want to build credit or reap the rewards that the credit card company offers to users. However, there’s a limit to how much you can utilize your card – specifically, a credit limit. This number is determined by the financial institution issuing the card, and represents the maximum amount you can buy with your card. Once you reach that limit, your card will be declined.
Hopefully, you never reach that point. Even though a credit card company will set a credit limit, it’s a bad idea to come close to it. In fact, most industry experts caution consumers to keep their credit utilization rate below 30 percent, according to The Balance.
Your credit utilization rate is easy to calculate. First, look at your credit limit. Let’s say it’s $1,000. Second, look at how much you have on the card now. Let’s say it’s $300. Finally, divide your amount used ($300) by the credit limit ($1,000). In this example, the credit utilization rate is 30 percent.
Maintaining a good credit score is important for future loan or credit opportunities. It’s also a number that future landlords and employers might look at. By adopting these three simple habits, you’re on the right path to keeping your score up.