Tips To Help Millennials Improve Their Credit Scores

April 1, 2022

As more older millennials explore purchasing a home, strong credit is more vital than ever. However, with a shaky employment market following one of the worst recessions in modern history, this generation has found it difficult to improve their score.

According to recent data, millennials have the lowest credit score of any age group in the country, at 628, which is more than 50 points below average. However, this isn’t always due to their financial irresponsibility. 

The majority have low credit and debit card balances, but short credit histories and, as a result, smaller credit limits.

OK, statistics aren’t on Millennials’ side, nor are they for other sections of the country. With a credit score that is lower than the national average and the highest credit utilization ratio of any generation, Millennials face significant challenges. But it’s not all doom and gloom. Here are some crucial steps you can take right now to give yourself a leg up if you’re a Gen Y.

Learn as much as you can about credit.

Isn’t it true that if you want to win, you have to know the rules of the game? Don’t let a lack of awareness of how credit works hold you back! 

Do you know what institutions are in charge of calculating credit scores, for example? (Hint: they’re Experian, Equifax, and TransUnion.) Also, credit scores are calculated in a variety of methods, and the score your landlord wants won’t be the same as the one you’ll need to get a car loan from the bank.

Consistently monitoring your credit score with a free annual credit report, which allows you to examine your score at no cost, is a smart habit for Millennials (and anybody else, for that matter).

Use credit to your advantage

While folks who are in a lot of debt may be tempted to destroy their credit cards, keep in mind that this will not benefit them in the long run. What banks want to know is how well you can use credit, and completely avoiding credit cards does not demonstrate the financial understanding that banks are looking for.

What is our recommendation? Get a credit card after doing thorough research on rates, conditions, and other factors, but use it sparingly. Good financial stewardship will always pay off in the end with cheaper rates on car loans, insurance, getting a mortgage, and more!

Plan ahead of time and be patient with yourself.

While there are many clichés about label-conscious twenty-somethings being “callous” with their money, we’re delighted there isn’t much evidence to back that up. The biggest advantage that previous generations have over Millennials is a matter of time: they’ve been there for a lot longer.

Keep this in mind as you attempt to create good credit and remove any blemishes from your credit report. Plan ahead of time for your financial strategy, and give yourself enough time for the results to show up.

Maintain a healthy credit utilization ratio.

Your credit usage ratio — the proportion of your credit card limit that you utilize – is the most important component in determining your credit score.

Your credit utilization ratio should ideally be less than 30%. This is where Millennials (on occasion) go beyond, with an average balance-to-limit ratio of 43%. When it comes to raising your credit score, a credit utilization rate of 10% is excellent.

Make the most of the power of good financial habits

Begin to form good financial habits, such as paying your credit card bills on a weekly basis. Student loan repayment can be the biggest stumbling obstacle for the average millennial, so setting aside a portion of your monthly income to pay off previous debts is smart planning.

Share living expenses and vehicles until your school loans are paid off.

While there are a lot of negative perceptions surrounding basement dwellers, moving in with your parents is a wise financial choice for Generation Y. With some of the largest student loans ever and a tight job market, you don’t need the added stress of soaring house rents.

If you can’t live with your parents, consider splitting the bills with a roommate (s). Also, whenever possible, try to carpool or take public transportation. The ultimate conclusion is that financial security is the most prestigious status symbol you can achieve.

On-Time Bill Payments

Payment history, or the consistency with which you pay your bills, accounts for 35% of your credit score calculation. Credit bureaus track payments on regular expenses like utilities and credit cards. 

You can truly make this strategy work for you if you pay your bills on time every time. If you can’t remember or aren’t always on time, automate your bill payments.

Establish A Credit History

A credit history is a record of all of your credit accounts; lenders use this information to learn more about you and your financial habits. Your credit history, for example, shows the number of credit cards or loans you have and your payment history.

While many millennials are unconcerned about their credit history at the moment, it can have an impact on larger purchases in the future. The earlier you start building your credit history, the better, because most lenders prefer to see a long track record of financial responsibility.

Trying to Find Low-Risk Credit Plans

As you plot your course toward your next major milestones, think about low-risk credit choices with low fees, low interest rates, and other safeguards that allow you to concentrate on saving. Here are some pointers to get you started:

When applying for a credit card, look for ones that have no annual fees, moderate interest rates, and few penalties. Ask your bank about a cash rewards card if possible, as this can help you reach your savings target.

Keep an eye on your credit limit and alter it as needed to accommodate your spending habits. If you’re thinking about getting a personal loan, pick one that suits your needs and works for you in terms of payback. 

A personal line of credit is another flexible, low-risk alternative for millennials. A line of credit is similar to a revolving account in that it allows you to use the money you have available, repay it, then spend it again as needed. Consider a line of credit with a fixed rate and overdraft protection while analyzing your options, so you can better secure your current savings.

How to Get a Low-Risk Credit Plan

It’s critical to establish a decent credit score in order to qualify for these low-risk credit options, as financial organizations frequently cut interest rates for higher credit scores. Here are three simple strategies to raise your credit score:

  • Pay down debt, especially credit card debt.
  • Make sure you pay all of your bills on time, as late payments might hurt your credit score.
  • Check your credit reports again to be sure your information is correct, and report any errors to the credit bureau responsible.


If you’re thinking of getting your first credit card, congratulations. Because this card is so important to your current and future financial well-being, make sure you choose the correct rewards program for you, read the fine print (ahem, fees), and start building credit right away.