Millennials Maintaining Good Credit

As a millennial myself, I’ve noticed that most millennial in my peer group do not get educated on maintaining good credit while we are young. We look at it like its free money. We have the tendency to spend until we get everything that we want without thinking about the interest rate or even how we will pay it back.

We are so used to our parents supporting us, waiting for allowances, and not having our own money to spend, that we go buck wild when we can do things on our own. As you get older, you realize the value of money and how to manage it. One important lesson to learn is maintain good credit by paying the bills you create on time. Your credit report is reviewed when looking for apartments, homes, applying for jobs, purchasing cars and host of other things. So, it is vitally important that you maintain good credit and manage money well.

I’ve summarized my experiences amongst my network of millennial to provide some insight about what I’m exposed to within my network and what I’m learning about the importance of credit, how it’s calculated and how to maintain good credit. Below is information I’m learning that I thought important to share in my article.

What Is Credit?

Credit is the ability to borrow money or access goods or services with the understanding that you’ll pay later. Lenders, merchants and service providers grant credit based on their confidence that you can be trusted to pay back what you borrowed, along with any finance charges that may apply.

How is Your Score Calculated?

Here are 5 components that make up your credit score;

  1. payment history – 35%

  2. credit mix – 10%

  3. debt to credit utilization ration – 30%

  4. credit history – 15%

  5. new credit – 10%

Ways To Maintain Good Credit

  1. Pay your bills on time – this goes for all your bills, not just credit cards and loans. Although certain bills don’t get reported to the bureaus when late, if you fall behind those also may end up on your credit report as derogatory marks.

  2. Keep your card balances low – your combined balances should be no more than 30% of your total limit. Make sure you can afford to pay off what you spend when that bill comes. This will save you money on interest as well as help you raise your score.

  3. Don’t close old credit cards – not many know, but when you close old card your card issuer no longer sends updates to three credit bureaus and the scoring formula places less weight on inactive accounts. It also reduces your available credit and when bureaus remove the account losing that credit history will shorten your average credit age and cause your score to drop.

  4. Limit applications for new credit – to many hard inquiries can have a negative impact on your score.

  5. Watch your credit report – it’s always good to keep an eye on your credit report. You can request a report from all 3 bureaus for free once a year. There are also service like Credit Karma, LifeLock, Credit Wise and more. Doing this will help you keep an eye on fraud and identity theft which can lead to inaccurate information on your report. The sooner they are detected, the faster they can be corrected, and your good score can be maintained.

These are my tip to maintaining good credit. I hope you enjoyed this article and found it helpful. Las but not least, do not be afraid to pass it along, let’s help one another maintain good