You're More Than A Three-Digit Credit Score
Why Millennials are Lowkey Embarrassed of Their Credit Score–and How They Can Improve It
Building a millennial’s credit score is the ultimate Catch-22. Young people are often rejected by credit card companies, not because of bad credit but simply a lack of credit history. How are you supposed to have a stellar credit score if you can’t even get approved for a credit card? A credit check resulting in a bank rejection letter or being labeled as “subprime” (a classification of borrowers with a tarnished or limited credit history) can definitely injure your pride – if not your ability to buy the things you want.
There, there, young’un— Here are 2016 stats that prove you’re not alone:
- 67% of 18 to 25-year-olds don’t have a credit card compared to 45% of 30 to 49-year-olds, according to Bankrate.
- 1 in 5 people ages 23 to 27 has been declined for credit multiple times within a single year, according to ID Analytics.
- 43% of borrowers ages 18 to 36 have a credit score of 600 or below, according to credit reporting agency TransUnion.
This Forbes article further addresses this topic. Now that you feel better knowing that you’re not alone, what can you do to correct it
Ways to Build Credit
Graduating from “subprime borrower” status means establishing a credit history. Here are ways to begin your credit building journey:
- Secured credit card. These cards are easy to qualify for but require a cash collateral or deposit. The minimum deposit is generally $300 to $500, and this amount is usually the card limit. Do the research, and choose a card with little to no fees. Ask the bank where you have checking account if it offers secured credit cards.
- Credit builder loan. This involves a credit union or community bank giving you a loan, though that money is never technically in your possession. The bank holds it while you make payments. Once you pay the loan back according to the agreed terms, the bank refunds you the money and sends a good report to the credit bureau. Win-win! According to this 2013 study, there was an average credit score improvement of35 points within six months of on-time payments for loans as small as $100. (P.S. Make these payments! Bad reports will be sent to credit bureaus as well.) This is a great option if you can’t afford a deposit for a secured credit card.
- Rent-reporting services. Rental Kharma and RentTrack add bills you are already paying to your credit report, lengthening your history of on-time payments. Not every credit score factors this in, but some do. This option is best for those with less than six months of credit history.
Ways Around the Credit Obstacle
When you don’t have time to wait for your credit score to soar, here are some ways around credit:
- Retail Credit cards. Retail credit cards are generally easy to get for those with bad or no credit. Some approval processes don’t even include a credit check. Research before opening a retail card. If you spend too much or miss payments, it could negatively affect your credit. Also, these credit cards typically have high interest rates.
- Point-of-Sale Financing. Our very own Acima Credit offers no-credit-needed financing that allows you to buy what you want and need today. This fair financing option gives you the ability to invest in important life-purchases without giving out your personal information. Within 90 days or sooner, you can pay off your purchase without the dreaded credit check.
The icing on the cake—Acima Credit recently partnered with Experian, a company that reports your payment history to credit bureaus. This means you can purchase exactly what you want today, all while building credit.
Credit score is an integral part of your future financial success and security. Make sure you educate yourself, and start building your credit ASAP.