A Financial Guide for Millennials: How to Get by with Subprime Credit and How to Raise itA startling fact about millennials is that a lot of you have bad credit. A report from TransUnion, one of the reporting credit agencies, details that nearly half of people between the ages of 18 and 36 have subprime credit, defined as a credit score of 600 or lower.
If you’re in this age group and asking, “What’s a credit score?” there’s a good chance you might be in this group of subprime millennials. Here are some important things you need to know about the consequences of being subprime, how you can get around a low score, including using personal loans for bad credit, and how to raise your score so you don’t have to live this way anymore.
What’s with Millennials and Credit?
The first problem that TransUnion found in its report of millennial credit is that these youngsters just don’t have a lot of it. The average credit history for someone in this age group is less than half that of other age groups. What this means is that millennials aren’t using loans or financing, and that can be a problem. Debt can be both good and bad, and if you have none or very little, you risk having a low credit score. This is a big issue for millennials who are buying cars and homes at much lower rates than groups in the past have.
Millennial Borrowing: Credit Cards vs. Personal Loans for Bad Credit
Another issue with millennials and low credit scores is the kind of debt they get into: namely credit card debt. The rate at which millennials open lines of credit is twice as fast as for any other age group. Millennials also utilize credit cards at a rate of 42 percent, as compared to all other age groups with just 29 percent utilization.
This is another factor that explains why millennials are more likely to be subprime. Lenders don’t like to see an individual using a lot of the available credit on lines of credit because it shows dependency on this kind of financing. They also don’t like to see frequent opening of lines of credit. It shows irresponsibility with cash and that an individual is desperate for it.
A lot of you millennials are living with bad credit, and that means getting approved for a loan is difficult. Turning to a credit card seems easy and reasonable. Always turning to credit cards will never dig you out of the hole, though, so try something else, like personal loans for bad credit. These loans represent a better kind of debt, that when used responsibly can actually improve your credit score. And they’re not likely to turn you down for a low credit score either.
The Consequences of Being Subprime
So what does it mean to have a subprime credit score? What has all that frenzied credit card use and general lack of credit done to harm your finances and how does that impact the rest of your life? The truth is that it can be pretty serious and detrimental to have such low credit. Ultimately, it could even prevent you from getting more credit cards, your favorite source of financing.
Aside from that, having a subprime score can also impact your ability to get approved for other types of credit or lending, like a mortgage or car loan. If you do get approved for a loan, your high score will cost you in the form of much higher interest rates. One alternative you have is personal loans for bad credit, but you may be shut out of other types of lending and find that you don’t have as many options as you might like, thanks to your subprime score.
Bad credit goes beyond your ability to get loans or to get them at affordable rates. We know millennials are not buying homes at the same rate as previous generations, but even rental homes and apartments can be hard to get with bad credit. Imagine you find your dream downtown loft apartment, but there are only a few left. Who is going to get their application approved? The person with bad credit or the one with sterling credit? And what about new jobs? A lot of employers are checking credit scores these days, and a subprime score could hold you back from getting the job you want.
Personal Loans for Bad Credit and Other Credit-Boosting Strategies for Millennials
The good news for millennials is that a subprime score doesn’t have to be a life sentence. There are all kinds of things you can do to improve your credit. If your problem is that you don’t have much credit, for example, taking out a loan or two, and using them responsibly can raise your score. Consider personal loans for bad credit, like those offered at FirstLibertyLoans.com. These are loans you are likely to get approved for and that will provide you with small loans that you can handle without risking missed payments.
Always making payments on loans and bills on time is crucial to establishing good credit. You have to do this because late payments will show up on your credit report and will drag your score down even lower. If you do have credit cards, make sure you only utilize about 30 percent of the credit available. Any more than this is a red flag to the credit agencies and will lower your score.
Some of the things that are impacting your credit score are a reflection of your youthful age and relative lack of experience. You may not have as much credit history as someone in their 40s or 50s and you may also not be aware of how what you do with money impacts your score. But now you do know, and you know what you can do to raise your credit score. You have no more excuses, so get out there and get better credit.
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