When you think of the term “student loan”, does the word “investment” also cross your mind?
If so, you’re not alone. In a recent survey1, conducted in June 2015, 84 percent of millennials said they believe a student loan is an investment.
Even better, that’s not the only optimism millennials are feeling regarding their finances and the future.
According to the third “How America Buys and Borrows” survey, which asked nearly 2,000 American adults ages 18 to 65 about their attitudes and perceptions of the current economy, financial situations and understanding of credit, millennials, ages 18-35, are the most optimistic about their finances.
- Looking ahead, 66 percent of millennials feel their personal financial situation will improve, compared to 48 percent of the general population.
- Nearly a third of millennials say they plan to buy a new home in the next three years, compared to 19 percent of their general population counterparts.
- 28 percent of millennials rate their current financial situation favorably, compared to 24 percent of the general population.
- Millennials are most likely to be in the process of refinancing their mortgage or buying an investment property, vacation home or new home for themselves.
This is all fantastic data that reflects strong optimism on the part of you—America’s youngest adult consumers. Yet despite this optimism, only half of millennial say they know where to go to learn about credit and how it works, compared to 55 percent of the general population.
Developing good credit habits early in life is important because those good habits will serve you well over a lifetime. Strong credit helps with more than borrowing. It can factor into everything from renting an apartment and getting a cell phone, to landing a job. Lenders, landlords, utility providers, and employers can all review credit reports when making decisions. If you’re one of the millennials that is planning to buy a home, you will get a first-hand look at how credit plays a role in determining interest rates when it comes time to secure a home loan.
As you know, there are a lot of benefits to having good credit. Here are ten simple tips to build credit and learn more about credit management. By practicing good habits and learning about credit, you can reach your financial goals.
- Monitor your credit regularly – Make sure you stay on top of your credit history and check all three credit bureaus
- Know your credit limits – Avoid being close to or maxing out your credit limits, which may negatively affect your credit score.
- Know that good scores typically equal good interest rates – Remember: Better credit scores may get you better credit interest rates.
- Do make on-time payments – Pay on time. Missing a payment may negatively impact your credit score. If you have trouble making your payments on-time, be sure to contact your lender right away.
- Know your debt-to-income ratio – Since lenders look at the amount of debt you have compared to your monthly income, try to keep your debt-to-income ratio under 35 percent.
- Consider a college or secured credit card – A secured credit card or a college credit card may be a good way to start building credit.
- Pay down highest interest rates first – When trying to pay down your debt, it’s recommended to pay down your accounts with the highest interest rate first.
- Live within your means – Set a budget and live within your means so you don’t overextend yourself financially.
- Pay more than the minimum – When possible, pay more than the minimum amount due on your credit accounts, which helps you pay down debt faster and can improve your credit score.
- Set up account and autopay alerts – Set up email and text alerts, as well as autopay, to help ensure that you pay your bills on time and build a positive credit history.
For more information about ways to establish or improve credit visit Wells Fargo’s online Smarter Credit™ Center or enjoy free courses available from our Hands on Banking® financial education program.
1 Wells Fargo’s “How America Buys and Borrows” survey conducted in June 2015. The sample includes more than 3,000 American adults ages 18 to 65.
Stephanie Grant is a communications consultant for the Consumer Lending Group (CLG) and is responsible for strategic programs and content development, including CLG corporate communications social media initiatives. The Consumer Lending Group communications team drives internal and external communications for all business lines within the Home Lending and Consumer Credit Solutions organizations, including: mortgage, home equity, credit card, auto lending, student lending, personal lines and loans, and retail services.