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Credit awareness is growing among Americans, but millennials have the least understanding of credit compared to older generations, according to a new study.
The survey of 2,005 U.S. adults was conducted in June 2018, on behalf of Discover Financial Services, the provider of Discover credit cards. It revealed a 12% increase in the number of people aware of their credit standing over the past year. And while millennials scored the lowest compared to other generations, they were the group most likely to be taking action to improve their credit scores (83% compared to just 66% of Generation X and 34% of Baby Boomers).
"Given where they are at in their lives, it makes sense that millennials are doing more than other generations to improve their credit scores," said Jeff Bielski, vice president of marketing at Discover. "Millennials are at a point where they may be looking to buy their first car or even their first home. We’ve seen that when consumers are preparing to make those milestone purchases, they develop a sense of urgency when it comes to their credit."
Millennials check their credit scores most frequently
Despite coming in last in reported credit awareness, millennials actually check their score more frequently than other generations. Seventy percent of millennials reported checking their score more than once in the past year, compared to 67% of Gen X and 61% of Baby Boomers. But a surprisingly large number of respondents across the board also believe that checking their score can damage it.
"In fact, millennials are more likely than other generations to believe this," said Bielski. He believes more awareness and education can be done to help dispel this myth and prompt more individuals to stay on top of their credit score, which, he said, “is one of the best ways consumers can improve their credit health.”
How do I improve my credit score?
If you want to build your credit, there are a number of steps you can take, beginning with learning about the factors that shape your score in the first place.
Two key factors that influence your score are your credit history length and your overall debt burden. Unfortunately, many millennials have little credit history and too much debt. But that doesn't mean you can't still build a solid credit score. Making regular, timely payments toward your debts can actually boost your score, since it shows lenders you're a reliable borrower.
Diversifying the types of credit accounts you hold can also improve your score. If you don't have one already, try opening a credit card account to start a new line of revolving credit. Then commit to paying off your entire balance each month. Be cautious of overspending, though. Adding new debt will hurt both your score and your wallet.
Finally, check your score periodically to measure your progress. If you're taking action, but your score hasn't improved over the past three to six months, try scaling back on using your available credit. If it has gone up, great! Continue to make regular payments. Don't be concerned, though, if your score shows minor volatility. Credit scores regularly change from month to month, so a taking a long-term view is best when trying to assess your credit standing.
The article, Credit Awareness Is On the Rise, But Still Low Among Millennials, originally appeared on ValuePenguin.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
