What Millennials need to know about credit scores

by Shelton on May 31st, 2014

filed under Credit Scores

Recent surveys have indicated that the Millennial generation, those 18 to 34 years old, have adopted prudent, frugal habits when it comes to money.

They shun debt, tend to use cash, and see the value of saving money. Coming of age amidst a near-economic collapse and resulting Great Recession will form those kinds of attitudes.

But a new survey shows one area where Millennials come up short financially. Theyre pretty much in the dark when it comes to their credit score and why it is so important.

The survey by the Consumer Federation of America (CFA) and VantageScore Solutions, LLC shows Millennials know less about credit scores than other adults. They know less about the businesses that use the scores, less about who collects information on which the scores are based and less about how scores can be improved.

Bad information

For example, they are more likely than other adults to think that credit repair companies can always or usually be useful in removing errors and improving scores. In reality, the best way to raise a credit score is to pay your bills on time.

Because of this knowledge gap, Millennials are less likely than other adults to take advantage of the federal law that allows you once a year to get free copies of your credit report from all three credit reporting agencies.

Obtaining their free credit reports not only allows consumers to check the accuracy of the reports but also appears to motivate them to learn more about credit scores, said CFA Executive Director Stephen Brobeck.

Looking in the wrong places

Because of a lack of knowledge or awareness about credit reports, Millennials may also be prone to look in the wrong place for their credit report. There are a number of commercial services that offer credit reports some even saying its free, but there is always some service you have to sign up for in order to obtain the report.

The easiest way and the way with no strings attached — to obtain a credit report is to visit www.annualcreditreport.com or call a toll-free number, 877-322-8228.

What else should Millennials know about their credit score? For one thing, having and using some credit is helpful to your credit score.

For example, if you have a couple of credit cards and charge a few regularly-budgeted items like groceries and gasoline each month, it helps your credit score if you pay the full balance each month. That last part is important.

Responsible use of credit

Credit agencies look at how much credit you have and how you use it. If you carry a credit card balance, the credit card companies will love you but it lowers your credit rating. Paying off the balance in full each month tells creditors you use credit responsibly.

Millennials should also know that that credit card issuers and mortgage lenders will use these scores when deciding whether or not to extend credit and at what rate. The better your score the lower your interest rate.

Experian, the credit reporting agency, offers a couple of other points of credit advice. Only apply for a new credit account when you need it. Dont open an account just to get a discount on a purchase.

Also, Experian says you should not open accounts just to have a better mix of credit. In fact, it probably wont help you score.

Balance transfer cards dont help

Balance transfer credit cards are a popular way to reduce credit costs but moving credit around doesnt help your score. Better to pay off debt rather than move it.

Dont close unused credit accounts thinking that will help your credit score. In fact, it is likely to have the opposite effect. Owing the same amount of money but having access to less credit will lower your credit rating.

Millennials, by and large, dont kid themselves about their credit knowledge. Only 40% think they have good or excellent knowledge about credit scores, while 62% of those 35 years and older think they have this knowledge.

The survey did identity a group of Millennials that actually possesses a lot of credit information. Those who have obtained their credit reports know more about credit scores than those who havent.

Bite bullet on finances: CRISIL to govt

by Shelton on May 31st, 2014

filed under Finances

Analytical company CRISIL on Saturday said a decisive mandate given in the Lok Sabha elections should embolden the next government to take hard decisions on its finances by cutting subsidies and curbing wasteful expenditure.

The decisive mandate has created the best environment in a long time to bite the bullet on government finances to ensure a long and healthy phase of economic growth in India.

It asked the government to go for fiscal consolidation by ensuring the money spent on social welfare schemes created durable assets and did not just remain cash handouts.

In the interim Budget, the Centre#39;s fiscal deficit was projected to come down to 4.1 per cent in the current financial year from 4.6 per cent estimated for the previous year. The estimates may be revised in the full Budget to be presented by the next government later.

Chief Executive and Managing Director Roopa Kudva said, The lowest-hanging fruit are fast-tracking of projects in the pipeline and resolving iron-ore and coal-mining issues. This will improve the efficiency of capital now stuck, pave the way for better returns on investment, create jobs, lift income growth and spur private consumption demand.

It said the government should tame inflation, give boost to manufacturing, improve asset quality of banks and bolster corporate debt markets to put India on growth path of 6.5-seven per cent in the medium term.

The firm said, Typically, monetary (cut in interest rates) and fiscal instruments (increase in government spending) are used to prop a sagging economy in the short run. But India has run out of such counter-cyclical policy ammunition as its inflation and deficits remain high and need to be trimmed.