This Generation's Credit Scores Are Improving the Most
It may not be the generation you think.Â
You may not pay much attention to your credit score until you need to borrow money or get approved for a financial agreement like an apartment lease, an auto loan, or a new credit card. The higher your credit score, the easier it is to snag a loan or obtain financing at a competitive interest rate. As such, it pays to improve your score as much as you can -- and one generation is doing an exceptionally good job in this regard.Â
Credit bureau Experian reports that over the past five years, the average FICOÂ® credit score among millennials has jumped 21 points from 647 to 668. This represents the largest increase of any generation during that same timeframe. It also indicates that millennials are making an effort to bring their scores up.
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That said, a credit score of 668 is only considered "fair" by Experian's standards (although it's right on the cusp of "good"). If you want a shot at the best loans, or best loan rates out there, you'll generally need a score of "very good," which means a minimum of 740, or, better yet, an "excellent" credit score.
The takeaway: Millennials still have work to do on the credit score front, despite their recent improvements.Â
Boosting your credit score
Any increase in your credit score is a good thing, but if you're still a few steps away from "very good" or "excellent" territory, you'll need to keep at it. One effective way to boost your credit score is to pay all of your bills on time. In doing so, you'll improve your payment history, the single most important factor that goes into calculating a credit score.Â
Paying off a chunk of existing debt is another way to improve your score. The second most important factor in establishing your credit score is your utilization, or the extent to which you're using your available credit at once. A utilization above 30% can hurt your score, so if you have a total credit limit of $10,000 and owe more than $3,000 against it, paying off some of that debt can bring your utilization down and your score up.Â
Furthermore, avoid applying for too many new credit accounts at once. Each time you do, it'll result in a hard inquiry on your credit record, which can bring your score down. At the same time, hang onto older credit cards in good standing. Those can boost your credit history, which will also help your score.
Finally, be sure to check your credit report for errors, and report mistakes if you spot any. You're entitled to a free copy of your credit report every year from each of the three major bureaus -- Experian, Equifax, and TransUnion. Correcting false, unfavorable information could help bring your score up.
Millennials need to keep pushing
Although it's great that millennials are boosting their credit scores, many still have a ways to go. If you're one of them, keep working on raising that number. In doing so, youâll get yourself more borrowing options. And youâll have something to be proud of, to boot.
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