Millennials check their credit score more often than Gen Xers and Boomers. Here’s why that’s key.
Millennials deserve more credit.
Turns out members of the generation often scapegoated for not saving enough, being saddled with the most debt and for spending all of their money on avocado toast and bachelor parties are actually leading the way in working to improve their credit scores.
Eighty-three percent of millennials (defined as ages 18 to 34 in this report) said they are taking active steps to raise their credit, according to a Discover survey released on Tuesday, compared to 66% of Generation X (ages 35 to 54) and 34% of Baby Boomers (ages 55-plus). What’s more, the youngest surveyed (between 18 and 21) outpaced all of the other age groups, with 87% already hustling to improve their scores.
The key way they’re doing so is by checking their credit scores, with 70% of millennials telling Discover that they’ve looked them up more than once in the past year, compared to 67% of Gen Xers and 61% of Boomers. That’s because 76% of millennials believe checking their score helps them make smarter financial decisions [such as whether they’re ready to buy a car or a house], compared to 62% of Gen X and 38% of Boomers.
“The really good news is that awareness of checking your credit continues to build … and the millennial population is leading the charge on that. We’re very excited,” Jeff Bielski, Discover’s vice president of marketing, told Moneyish. “Staying on top of their credit and making sure they make progress on their credit score is going to set them up for better financial decisions.”
Of course, more than one in four millennials also told financial tech firm OppLoans that their credit scores are holding them back, with 27% saying their poor credit has prevented them from getting a new car, and 25% seeing their applications for houses or apartments declined. So it’s not surprising that many of them are keeping close tabs on their scores as Americans dig themselves out of $1 trillion in credit card debt, according to the Federal Reserve, breaking down to $8,732 per household on average.
But checking can be scary for those who aren’t confident about their credit. In fact, about half (48%) of people with credit card debt confessed that they were afraid to check their credit scores, according to a recent Student Loan Hero survey, because they thought it might hurt their credit score, were worried about being scammed, and even worse, because “it seems like too much work.”
“There are a lot of people who believe that checking your own credit hurts your credit, and that’s just not true,” Matt Schulz, chief industry analyst at CompareCards.com, told Moneyish. “And the best news is, it’s never been easier to find your credit score, and you can do it for free.”
Sites like CompareCards.com, Nerdwallet.com, CreditKarma.com and Credit.com offer free credit checks, while many credit card providers have also rolled out free monthly credit reports. Discover now offers Credit Scorecard, for example, which gives everyone (including non-cardmembers) access to their FICO credit score for free. “And you can also go through the two main credit score companies, FICO and VantageScore,” Schulz added. “Not all of them are free, but many of them are.” Or get your full credit report from the three credit bureaus (Equifax, Experian and TransUnion) for free once a year at AnnualCreditReport.com.
Schulz said that checking your score every month is the best way to catch fraud or identity theft before it gets too out of hand, or to pick up on errors like missed payments that you actually made. “If your score moves five or 10 points a month, that doesn’t necessarily signify that something is wrong — but if it moves 25 or 50 points, that’s a significant thing that you need to check out,” he said.
Red flags can include any accounts opened in your name that you don’t remember opening, outstanding debts you have already paid off, or missed or late payments that you know you made on time. You’ll also want to make sure that your name is spelled correctly, and that your address and contact information are up to date, so you can be alerted if anything changes.
Kimberly Palmer, a personal finance expert at NerdWallet, agreed that it’s better to check your score, especially if you’re about to apply for a credit card, mortgage, car loan or some other large financial purchase. Your credit score determines whether you are approved, as well as what you’re interest rate will be, so it’s vital to know what you’re working with.
“It can be scary to find out bad news about your credit score, but the fact is, once you know what your score is, you know what actions you need to take,” said Palmer, noting it often simply comes down to making payments on time to keep your accounts in good standing, and chipping away at your outstanding balances to stay under 30% of your credit limit. You can do so by setting automatic payments, or doubling your credit card payments to twice a month (the first and the 15th) if it fits in your budget to do so.
“People tend to overthink and over-complicate credit, but when you get right down to it, good credit is just paying your bill on time, every single time; keeping your balance as low as possible [less than 30% of your credit limit]; and not going crazy applying for too much credit too often [which suggests you’re getting financially over your head],” added Schulz. “It’s not always easy to do, and it’s hard to knock a high balance down, but it terms of what you need to know, it’s as simple as that.” Read here for more ways to dig yourself out of credit card debt.
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