Did you know that Millennials have the lowest average credit score, when compared to Baby Boomers or Generation X? Meanwhile, 25% of surveyed Millennials say their low credit score has cost them homeownership and another 25% say they don’t know what their score is.
At the same time, about 50% of Millennial-aged Americans are living paycheck to paycheck, and over half are carrying a balance on their credit card month-to-month.
If you fall into this age group, it’s easy to see how you may feel like your finances are out of control and building your credit score will be impossible. However, there is hope and you may find success by trying the following things.
Having a Financial Safety Net
They say it’s best to save 3-6 months’ worth of living expenses for financial emergencies. However, when you’re living paycheck to paycheck, saving that much money may seem like a luxury you can’t afford.
You’re not alone. In fact, nearly half of surveyed Americans in a 2016 study said they would have a lot of trouble finding an extra $400.00 for these emergencies.
So, what do you do when these costs blindside you? Miss a few bill payments and try to catch up next month? Put it all on your credit card? These are two popular choices, but they’re probably not going to help your credit – in fact, they may have the opposite effect.
You may consider getting a line of credit to act as a safety net. A line of credit is revolving credit, which means you’re free to borrow and pay back as you see fit. You’re under no obligation to use it and you’re only charged fees based on what you use.
If you have damaged credit, you may not be able to get a line of credit from a major bank. You may have better luck applying for an online line of credit, such as a CreditFresh Line of Credit by CBW Bank, which gives people the opportunity to positively impact their credit. At Creditfresh.com, your subprime credit may not stop you from getting an online line of credit.
Of course, there are many factors that affect your credit score, and frequently paying down your line of credit won’t be enough on its own to rebuild your credit.
If the line of credit is there to act as a safety net, you may not have to make tough financial decisions about how you will “find” the money.
Building Credit By Paying Bills
Paying your bills on time is critical. A single 30-day delinquency can hurt your credit score by as much as 90-110 points.
It’s important to know that paying your bills on time may not necessarily build your credit score, as not all payments are reported to credit agencies. But it is possible to have this activity reported.
You may consider paying your bills using your credit card, and then paying the balance down right away. Your credit card balance payments are reported to credit agencies and if you pay the balance down right away, your score could also be helped by a low credit utilization ratio.
If you don’t have a credit card right now because of damaged credit, you can still do this using a secured credit card. Most major credit card companies offer these and they work pretty much like credit cards.
The key difference is you’re paying to secure the card and that amount acts as your credit limit. Your balance and your credit utilization on these secured cards are also reported to credit agencies.
You may also be able to use this method with your line of credit, as your payments, balance, and usage of your line of credit could also be reported.
Do What’s Right for You
Remember, everyone’s financial situation is different and these two methods may help some people, but not others.
You also need to remember that these strategies won’t work if you’re doing other things to hurt your credit elsewhere, such as missing other payments, or carrying a high balance on another card.
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