Statistics are not on the side of Millennials in Durant, OK, as well as for other parts of the country. With a credit score that is lower than the national average, and a credit utilization ratio that is the highest among all generations, Millennials are faced with some great challenges. But it’s not all bad news here. If you’re a Gen Y, here’s 6 vital steps you can do right now to give yourself a leg up.
1. Educate yourself about credit
If you want to come out on top, you have to know the rules of the game, right? Don’t let yourself be held back by a lack of understanding of how credit works! For example, do you know what are the institutions responsible for calculating credit scores? (Hint: They’re Experian, Equifax and TransUnion) Also, there are a number of different ways of calculating credit scores, and the score your landlord asks for won’t be the same as the one that’ll help you get a vehicle loan from the bank.
A good habit for Millennials (or anyone for that matter) is to consistently monitor your FICO credit score with a free annual credit report which enables you to view your score at no cost.
2. Use credit to your advantage
While those in chronic debt may be tempted to shred their credit cards to bits, remember that this isn’t going to help you in the long run. What banks want to know is how well you can use credit, and signing off entirely from credit cards does not lend itself to demonstrating the financial understanding banks want to see from you.
Our advice? Get a credit card after performing a comprehensive research on rates, terms, etc., but use it sparingly. Good stewardship over your personal finances will always reward you in the end with lower rates on vehicle loans, insurance, obtaining a mortgage, and more!
3. Start planning early, and be patient with yourself
While there are many stereotypes about label conscious twenty somethings “callously” spending hard-earned cash, we’re glad that there isn’t much data to back up that claim. The main advantage that earlier generations have over Millennials is one of time – they’ve been at the game quite a bit longer.
Remember this once you start working to establish good credit and erase any existing blemishes in your credit report. Plan your financial strategy well in advance, and allow a reasonable span of time for the results to become obvious.
4. Keep your credit utilization ratio under control
The main factor contributing towards a high credit score is your credit utilization ratio – the percentage of your credit card limit that you use.
Ideally, your credit utilization ratio should be within 30%. This is where Millennials (at times) overshoot the mark, having an average balance-to-limit ratio of 43%. A 10 percent credit utilization is ideal when improving your credit score.
5. Leverage the power of healthy financial habits
Start building healthy financial habits like paying your credit card bills on a weekly basis. A student loan repayment can be the biggest stumbling block before the average millennial, so reserving a portion of your monthly income towards getting out of pre-existing debt obligations is prudent planning..
6. Share living costs and vehicles till you repay your student loans
While there are many negative stereotypes about basement dwellers, moving in with your parents is a smart financial move for Generation Y. Saddled with some of the highest student loans ever, and battling against a tough job market, you don’t need the additional burden of skyrocketing house rents.
If sharing a home with parents is not an option, consider splitting the bills with a roommate(s). Also, try using a car pool or public transportation as often as possible. Here’s the bottom line – financial security is the biggest status symbol that you can aspire to.
If you’re looking to assess your financial ability to buy a home in Durant, OK, let’s set up a time to chat.