in Basics of Budgeting & My Experience

How to Build up Your Credit as a Millennial

Photo by Riccardo Bresciani

This post is going to talk about credit, and the ways that you can improve yours. As millennials, we have certain goals that for many of us seem so out of reach – and credit plays a sizable role in these.  Does it feel like you’re never going to be able to afford a down payment on a house? What about that month-long backpacking trip you’ve dreamed about for years? Just want to be able to pay your bills on-time each month?

When you finally do have that down payment, you want your credit score to be high enough to snag you a good interest rate.

First of all; if you have credit card debt (or other high-interest debt) that should be your highest priority after your monthly bills. The interest you might be paying on your credit card is not going to be pretty after a few months. You could be paying hundreds by the end of the year if you carry a balance on your cards.

That’s not all! I know other people who are nearing thirty years-old with no credit because they’ve never gotten a credit card or had to take out loans. Friends of mine have been given cars by their parents, or they’ve never gotten credit cards, or they never went to college and therefore have no student loans.

I think millennials have been drilled with the idea that “credit cards are bad,” due to the mistakes our parents may have made. The result has been that we are more careful with such things, which is excellent! But having one or two cards is going to help you build your credit so that you won’t have trouble getting a house or a car.

It’s important to note that you can have great credit even with a ton of debt! I’m up around $80,000 in student loan debt and I have a credit score of 751 at 26 years old!

Learn Your Credit Score

Just in case you didn’t believe me, here’s my score!


I had to nag my boyfriend for about a year before he got up the courage to make an account on CreditKarma. This website is seriously legitimate – it will list all of your debt, your percentage of online payments, etc. It knows more about your finances than you do, which is helpful (and unnerving).

Creditkarma is how I learned that I had become delinquent on one of my student loans. I noticed that my score had dropped but never received any e-mails from the loan company. This had been an automatic payment that had stopped paying when my card number had changed.

Creditkarma will lay everything out in the open for you, plain as day. But if you’re not interested in logging into this website, you may be able to check it through your credit cards as a soft inquiry. A soft inquiry will tell you your credit score without negatively impacting your score. A hard inquiry will drop your score because it is usually used when you are taking a loan or applying for credit.

Learn What Has the Highest Impact

The factors that impact your score will have varying effects. Missing a payment on one of your credit cards will have a more damaging effect than having two hard inquiries.

As a rule of thumb, the following factors will have a high impact on your score:

  • Derogatory Marks – bankruptcies, tax liens, etc. You will want 0 of these. 1 is considered so-so, 2-3 poor and 4+ is very poor.
    • Sometimes the only fix will be to wait it out and prevent it from happening again. A bankruptcy will stay in your credit for 10 years.
  • Payment History – percentage of payments you make on-time. Obviously, you want this to be 100% – this will have the best impact. 99% is a different bracket, as is 98% and 97%. When you only make 96% or less of your payments on-time, you’re going to have a bad time.
    • Time will be on your side in this case as long as you continue to make on-time payments.
  • Credit Card Utilization – how much of your available credit you are currently using. For example, if you have $5,000 in available credit but you have a balance of $1,000 on your cards, your utilization is 20%. It’s bracketed, also, meaning that 0-9% is best, 10-29% good, 30-49% so-so, 50-74% not good, 75% + is bad.
    • Fix it by paying down your cards so that you’re somewhere in the sweet spot between 0%-9%.

      If your credit is a mess, these are the three things you NEED to focus on to have the biggest impact on your credit.

What will have moderate impact on your score is this:

  • Age of Credit – how old your oldest line of credit is. As a millennial, you may not have a good score in this area. I certainly don’t. Even if your oldest credit card is literally the worst credit card in the world, you want to keep it. Ideally, you want your oldest credit to be at least 9 years old. 7-8 years is still considered good, while 5-6 is mediocre. Anything younger than this and you’re in the danger zone. Keep in mind that this score is calculated by your oldest credit line, not all of your credit lines.
    • Don’t close out your oldest credit line, even if it’s a P.O.S. card or you never use it. Do the bare minimum to maintain it, because as you can see, you want your oldest credit to be at least 9 years old.

Some things that will only slightly impact your credit:

  • Credit Inquiries – how many times someone has run your credit. This is likely when you’ve applied for a loan or to take out credit. Every time you apply for a new credit card, you’re going to get a hard inquiry. Keep in mind that soft inquiries (like checking Creditkarma) do not impact your credit.Ideally you would like to have 0, but that’s not always possible. Having 1-2 is still considered good, while 3-4 is so-so. 5-8 is poor, and 9+ is very poor.
    • Be careful when you’re applying for loans. If you’re shopping around for cars, don’t let them run your credit unless you are really serious about the car. Don’t have your credit run at multiple locations. These inquiries will stay on your report for 2 years.
  • Total Accounts – think of this as like your credit portfolio. This shows lenders that you’ve been around the block a little bit and you know how it all works. If you only have one credit card for your score to go by, this will mean that you have one account. That would not be good. Anything over 21 is considered good.
    • I have 29, and apparently more than 100% of people my age in my state. You can get more accounts by having taken and paid off loans, having a few credit cards, etc. The total number of accounts will include open and closed lines. So you get credit here for loans that you’ve paid off. If you have more than 21 accounts, you’re in the clear! 11-20 is still considered good. 6-10 is considered poor, and 5 or less is considered very poor.

 Build Your Score

Everyone is going to have a different strategy to boost their scores, so I won’t go into much detail here. You have to figure out what your strategy will be by doing this:

  1. Learn Your Score
  2. See What is Hurting Your Score
  3. List What you can do to Improve it
  4. Do those things!

For example, if you see that you haven’t been making enough on-time payments, this needs to be your number one priority. Set up automatic billing (but check your bank account every month to make sure it’s actually paid), make a payment calendar, etc.

You want to work your way down the impact hierarchy. Have you done everything you can in the “high impact” range? Then move on, until you have done literally everything you can. Even then, your credit should only improve over time.



1 Comment

  1. Nadalie

    Thanks for these great tips for improving your cred. I’ve been able to hold a high score throughout my 20s, with student loans like you, by treating my credit card like it was a debit card. No late payments. Also, consolidating any debt you have with a line of credit probably helps too!

    16 . Feb . 2017

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