Last summer, credit reporting agency Experian released some sobering data on Millennial credit scores. Older Millennials, or those between 29 and 35, have an average credit score of only 665, while younger Millennials aged 22 to 28 are an average of 13 points lower, at 652.
Some of this may be attributable to age—after all, most 22-year-olds are just out of college and may have no credit history at all. But for many Millennials, a lower score is a clear sign of the unique challenges this generation has faced. Most older Millennials graduated high school or college straight into the Great Recession. College costs have risen exponentially since the early 2000s, which means those just starting out may be behind the student loan eight-ball. And with many Boomers suffering retirement-altering financial losses in the Great Recession, Millennials often don’t have as much of a family safety net as previous generations.
Fortunately, there are a few simple things everyone can do to improve their credit scores.
Pay Off Low-Limit Cards
Credit card utilization rates have a huge impact on credit scores. If you have balances spread out among quite a few low-limit cards, this may be lowering your credit score—even if your overall debt isn’t high. For example, someone with three $1,000 limit cards and a total balance of $1,500 has a 50% utilization rate, while someone with a $3,500 balance on a $15,000 limit card has only a 23% utilization rate.
Since credit agencies advise that your overall utilization rate be 30% or less, it’s a good idea to pay off these low-limit cards or request an increase in your credit limit to get your rate down.
Don’t Close Your Oldest Accounts
One of the factors weighing against many Millennials is the average age of their credit histories—that is, the total number of credit accounts divided by the number of months each has been open. The older the average credit age, the higher the credit score (all other factors being equal). This means it’s important not to close your oldest accounts or to suddenly open a whole slew of new ones.
This doesn’t mean you have to carry a balance on these accounts, but taking the steps you need to keep them active can keep your credit score on the upswing.
Monitor Your Credit Report
Even the most diligent among us may have a bill slip through the cracks occasionally. Office workers and credit collection agencies aren’t foolproof either—which means there may be derogatory information on your credit history that doesn’t belong there.
By taking advantage of one of the many free credit reporting services available or requesting your three free annual credit reports, you’ll quickly be able to spot any discrepancies and get these matters cleared up (and your good score restored).