3 tips to help millennials build and improve their credit

Millennials are transitioning from being college students to first-time homeowners. This new stage in their lives will come with new responsibilities, a very important one that is often overlooked is developing good credit. In order to take out loans for cars or homes, credit is absolutely necessary to let banks know that you are likely to pay them back and that you are a good investment for them. The following are a few tips on how millennials can build or improve their credit:

1. Get organized.
The first step is gathering and organizing the mess of numbers that surround your personal finances. Start by making a list of financial goals and areas you'd like to improve upon. From there, get a calendar. Your calendar can be a physical fill-in one or a digital app for your computer or smartphone. Many digital calendars and organizational tools are available for free.

Once you've got your calendar, write when monthly bills are due. Fill in your calendar with reminders like "rent due today," or "pay credit bills" to keep you from missing an important payment.

Organization can help more than your finances - it can make your life worry-free.
Organization can help more than your finances - it can make your life worry-free.

2. Keep an eye on your finances.
The next step will be to monitor what's coming in and out. Updating your budget is the best way to initiate this process. Most millennials fresh out of college will be right in the middle of several major transitional years. One of the biggest things you can do to improve long-term credit is to manage your short term finances.

The core problem leading to bad credit is not being able to manage and pay your bills. A solid budget can help you see clearly what is coming in vs. what is going out. Once you've begun to keep an eye on your outflows, it won't be difficult to begin climbing the credit score ladder.

"Excellent credit scores begin at 700 according to most scales."

"Credit scores are determined by what's in your credit report," said Linda Sherry, director of national priorities for Consumer Action told Bankrate. Credit scores are important because they are one of the first things a loan provider will look at when determining whether or not the bank should help. Bankrate also defines a credit score as a three-digit number generated by a mathematical algorithm using information in your credit report. Credit scores are designed to predict risk, and offer a future outlook regarding how likely it will be that you will default on your credit over the next two years after scoring.

There are quite a few free credit reports available online, many of which offer monthly emailed updates. These can be good for your records, but don't sign up for too many reporting services. In addition to spamming you with email, running too many credit checks every month can actually be negative for your score.

Excellent credit scores begin at 700 and go up from there, according to most scales. A full list of credit score indicators and commonly used credit rating systems is available here, via Credit.com.

3. Manage your credit cards. 
According to research from FICO via USA Today, 31 percent of millennials have never applied for a credit card. Before new journeys into the credit sphere even begin, millennials need a solid grasp on what they're getting into - as it is easy to get carried away.

Before you expand your credit card inventory, you need to get a handle on managing one card. Organization of your finances is a great starting point, but thriftiness and new spending habits are the direct result of your newfound organization, and need to be tested with time. According to ABC, you should prove you can manage one credit card for a minimum of 12 months without missing payments, in addition to being debt-free. Once you've proved that you can handle debt and manage credit balances effectively, allowing yourself more credit wiggle room can help speed up your credit score improvement, provided you remain on-time with future payments. 

For more information about smart ways to manage your finances, contact Landmark Bank.

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