Top 3 ways for millennials to establish credit


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Just starting your financial life? If so, you may have a credit report as slim as your bank account. Fattening up both takes more than just bringing home the bacon.

Still, it’s possible to boost your credit score by taking a few strategic steps as a millennial, age 18 to 34.

Step 1: Pay your bills on time

“The single most important thing you can do is to pay whatever debt you have on time,” says Ken Chaplin, senior vice president with TransUnion in Chicago.

Chaplin says developing a plan to get out of debt — particularly to pay off high-interest credit card debt — is “a close second in importance to on-time payments.” But late payments stay on your credit report for 7 years from the date of the missed payment and can cause long-term damage to your credit.

He says it’s essential to make at least the minimum monthly payment on time on all of your debts. This includes your student loan payments because they show up on your credit report, too.

Step 2: Report your rent payment to credit bureaus

Many millennials prefer to avoid credit card debt and other loans if possible. While this is financially smart, counterintuitively, a lack of credit can mean your credit score is low and your credit report is scanty.

“If you want to borrow for a larger purchase in the future, you need to prove to creditors that you are creditworthy,” Chaplin says. “Ask your landlord to report your rent payments to a credit bureau, and you’re proving that you can handle annual payments of $12,000 or even $24,000, depending on the size of your rent.”

TransUnion and Experian have mechanisms for landlords to report rent payments. You can also sign up for Rental Kharma or RentReporters to have your rent payments sent to the credit bureaus.

Of course, if you make a habit of paying your rent late, it’s a bad idea to get that reported to the credit bureaus.

Step 3: Get a hefty credit line, but don’t use it much

“If you’re very disciplined and won’t be too tempted by access to credit, you should apply for a low-interest credit card,” Chaplin says. “Some people will be tempted to use the full credit line of $5,000 or whatever it is, but that will hurt your credit.”

Having access to credit but not using it too much is an important way to improve your credit score. Chaplin suggests using the credit card for small purchases and paying the bill in full each month to demonstrate your ability to handle credit.

While you can’t boost your score in a day, taking the steps to pay your bills on time, have your rent reported and to carefully use a little credit will give you an edge when you need a high credit score to reach a new financial milestone.