20 easy ways millennials can boost their credit

According to a report published by Experian at the end of 2013, young adults aged 19 to 29 had an average credit score of 628 — more than 50 points lower than the national average and the lowest of all the age groups. If you’re a millennial, maybe you’re trying to avoid debt like the plague by staying away from credit cards. Or maybe you rely on a credit card when money is tight, but you have trouble keeping up with the payments. Either way, your credit score might be negatively impacted.

Your credit (or lack thereof) might affect you in the near future more than you realize. Banks, credit unions and auto dealerships decide whether to do business with you based on your credit history. If these guys don’t trust you enough to give you a loan, you might be unable to make big purchases such as a home or a car.

There is good news, though: your credit is constantly evolving. In fact, any time a lender requests your credit report, a new credit score is created with that report. While your credit can be improved at any time, you have to put in the effort to build a strong credit history.

20 Ways to Improve Your Credit Score

1. Pay all your bills on time.

A good payment history is a large factor that can determine your credit score. Creditors can report just one late payment 30 days past due, and that’s enough to ding your credit score.

2. Never ditch a phone plan or utility bill.

While cell phone plans and utility accounts do not routinely report your on-time payments to the credit bureaus, they can report a default. That default can stay on your credit report for up to seven years.

3. Check your credit reports from all three credit bureaus once per year.

Or, you can check your credit report from one bureau every four months. Make sure there are no inaccuracies, and keep track of your starting point and progress.

4. Monitor your credit score.

Depending on the credit monitoring site you choose to use, you can access your different credit scores for free or for a fee.

5. Improve your “credit utilization ratio.”

To improve your credit utilization ratio, increase your available credit either by paying down debt, getting another credit card or having your credit card limit raised. This can improve the ratio between how much credit is available to you compared to how much credit is used. Your credit utilization ratio is another large factor that’s used in determining your credit score.

6. Make small purchases on a credit card.

The smaller the purchase, the more likely you can pay it off before the payment due date. This can keep your credit utilization ratio low while establishing a good payment history.

7. Get a secured credit card.

If you cannot get a credit card, try getting a secured credit card to create a solid payment history.

8. Become an authorized user on a parent’s credit card account.

This can allow you to build credit in your own name while minimizing credit card pitfalls and liability. Be sure the credit card issuer you choose reports authorized cardholders to credit bureaus.

9. Build an emergency fund.

An emergency fund, which can simply be a savings account, can help you stop relying on credit cards for unexpected expenses. This way, cash will be available for life’s little emergencies such as a car break down or unforeseen bill.

10. Stop using prepaid cards, and develop a relationship with a bank.

Prepaid cards, which act as bank replacements, won’t help you build your credit. Start a relationship with a bank by opening a checking or savings account and applying for a credit card.

11. Choose a credit union over a big bank.

Credit unions might offer slightly more lenient loan and credit card approvals for members.

12. Stay on top of your student loan debt.

Direct Subsidized Loans in forbearance or payment deferral (delayed) will not negatively impact your credit score (although they do impact your amount owed and future debt load). Instead, they are reported “paid as agreed.” But once payments become due, late payments and defaults can have serious adverse effects. Sometime, they can’t even be discharged in bankruptcy.

13. Calculate your debt load, and keep it below 36 percent.

Lenders look for a debt-to-income ratio that is below 36 percent. To find this ratio (or debt load), add up all your monthly debt payments, divide your monthly payments by your monthly gross income, and move the decimal point two digits to the right.

14. Don’t close old or paid-off credit cards.

The unused credit can benefit your credit utilization ratio.

15. Consider moving in with roommates.

Or, think about getting a second job or even moving back in with your parents to pay off student loans or credit card debt quickly if it is negatively affecting your credit score.

16. Never carry a balance on a credit card.

Carrying a balance on a credit card can lead to paying more for everything because of the added interest that accrued. This can also increase the possibility of missing credit card payments.

17. Don’t apply for multiple loans or credit cards at one time.

Every time you apply for a loan or credit card, it results in a hard inquiry — a ding on your credit report. Too many hard inquiries can negatively affect your credit.

18. Use mobile banking.

Many banks and credit unions offer mobile banking, which can help keep you on time with payments.

19. Make your payments and savings automatic if you have dependable earnings.

Sign up for paycheck direct deposit instead of re-loadable debit cards. Set up an automatic transfer to an emergency savings account, and take advantage of automatic online bill pay for recurring bills so you never miss a due date.

20. Never use a credit card to buy things you cannot afford.

This is how credit card debt troubles begin and build.

Boosting your credit score is one of those things that takes time, but it is worth the hard work. Utilize these tips while you’re young, and you can enjoy numerous financial opportunities in your near future.