Credit has been difficult for millennials to obtain. 32% of millennials surveyed were denied a financial product this year because of their credit rating, according to a new study from Bankrate.com. Breaking down details like this, 19% were rejected for a credit card, 8% for a car loan, 6% for rental inquiries, 5% for mortgages, insurance and utilities or home services and 7% for other loans.
Ted Rossman, credit card analyst at Bankrate.com, says lending standards tightened significantly in 2020 due to COVID-19 and economic uncertainty. “In the second quarter, 72% of banks surveyed said they tightened credit card lending standards and 0% relaxed them. Lenders are much more selective about who they approve,” Rossman said.
This impacted potential borrowers of all ages, and millennials had additional factors that contributed to their failure to get credit. What trips them up and better yet, how can they increase their chances of not being denied credit and other financial products?
Many millennials experience credit problems, primarily because of the amount of student loan debt they carry out of school, says Leslie Tayne, a debt resolution lawyer with the Tayne Law Group in Melville. “That, combined with the massive layoffs during the pandemic, made it harder for them to fight debt,” she said.
Without emergency funds, they go into debt just to survive and struggle to pay off their debts on time, says Deborah Jacobs, financial coach at Money Smart for Life in Somerville, Massachusetts.
Paying late bills, especially credit card bills, is a sure way to improve your credit score. Another no-no is to maximize credit cards. “Credit scores go down when you use more than 30% of your available credit; the less you use, the better, ”says Jacobs.
How to move forward
What you want to know, however, is how to make it harder for lenders to say no to you. Know before you go. In other words, before you approach a lender, be aware of the story your credit report tells. Check your credit scores with the three major agencies, Equifax, Experian, and TransUnion to make sure they’re correct. Report any errors to your creditors, ask them to correct them, and notify the credit bureaus of the error.
Annualcreditreport.com provides free credit reports once a week until April 2021. American Express allows you to check your TransUnion VantageScore for free and Credit Journey and Chase will allow you to check your Experian VantageScore, Tayne reports.
Consider programs like Experian Boost (which incorporates cell phone, Netflix, and other payments that haven’t historically built credit) and eCredable (which incorporates a variety of utility plans that previously didn’t matter). “These can help you increase your score quickly,” says Rossman.
Think carefully. Make sure you have at least three months of verifiable income. “If you lost your job this year due to the pandemic but were recently hired, wait until you have at least three months of pay stubs before applying for a financial product,” explains Chad Rixse, director of the financial planning at Forefront Wealth Partners in Austin. .
Remember, less is more. You shouldn’t need more than one or two credit cards. Instead of wrapping your wallet in plastic, “focus on building a strong credit history showing that you can manage your existing debt with timely payments,” says Pinky Shah, Mortgage Strategist at Fairway Independent Mortgage in Jamesburg, New Jersey.
Duration is important when it comes to your story. If you have unused cards that you have had for a long time, do not close them.
Sign up to receive COVID-19 SMS alerts.