Millennials, Its Time to Build our Credit
Ah Millennials, call us entitled or narcissistic, but I am proud of my generation. The way I see it we are the generation of the 21st century, these days the world is changing faster than ever before and it is up to us to adapt and grow.
One area where millennials are struggling to find their footing is personal finance. The average millennial is $45,000 in debt. Student loans make up the bulk of this followed by credit card debt, car loans and mortgages.
Despite these figures the percentage of credit card debt among millennials is the lowest it has been since 1989. But this isn't due to millennials great credit management, the low figure is actually a product of young people like me avoiding credit cards completely.
With student loan debt skyrocketing for our generation its understandable that young people have turned away from credit cards in an attempt to avoid further debt accumulation. On one hand I commend my peers, less debt is always a good thing. But on the other hand, by fostering this distrust for the credit industry millennials are failing to establish a credit history. THIS IS A BIG DEAL. Without good credit you can have trouble securing a mortgage or car loan, and some employers even check applicants credit scores before hiring.
SO we need to learn how to manage credit instead of avoiding it. Here are my tips:
1. Keep it Simple.
Before applying for a credit card make sure you have savings so that you can always pay your balance. Start with one card, always pay your balance on time. Enroll in automatic payments so you never have to sweat it.
2. Joint Credit Cards
Joint credit cards are great options for teens or young adults who are still partially supported by their parents. I had a joint credit card with my mom from high school through college. This allowed me to use my card for family expenses like groceries or school supplies and most importantly I learned about the perils of credit cards at a young age under the watchful eye of my parents.
3. Segment your spending.
An easy way to make sure you never go overboard with credit cards is having a designated card for certain spending. I only use my Discover card for gas because of the cash back incentive. This is helpful because my monthly bill is always consistent and predictable.
4. Always spend less than half your credit line.
Or always use less than 49% of your credit line to have the best impact on your credit score. If this is an issue you can call your credit card issuer and ask them to raise your credit limit so that you can spend well below this line.
5. Evaluate your spending.
Are you buying things you truly need? Make sure your expenditures are realistic for your income.
6. Always pay in full, never pay the minimum.
Credit cards marketed to young people can often come with high APRs so never accumulate a month to month balance.
7. Monitor your credit score.
Keep an eye on your credit score and watch it grow!