You thought your credit score would be a fat 800, but you just looked it up and it's a mediocre 600 — or worse.
Don't panic. Information is power, and you're already ahead of the game, given that only about half of millennials actually know their credit score. You have options, and it's certainly better to pursue them while you're young, instead of waiting until you're trying to buy a house.
In fact, while the three steps below can help you improve your credit in the long term, it might take a month or longer before you see any big change reflected in your score: That's all the more reason to take action as soon as possible.
Pay down (at least some of) your debt.
Compared to other strategies, "the simplest and quickest credit booster is paying down your credit card balances," millennial financial expert Stefanie O'Connell, author of The Broke and Beautiful Life, wrote in an email.
There is evidence that millennials aren't all big on credit cards in the first place, with a January Facebook Insights survey finding that 57% of users ages 21 to 34 said they would rather pay for goods and services in hard cash than with a credit card. But that's not necessarily a blessing, for to build a good credit history — and increase your credit score — you need to actually use credit. Your debit card, even if it has a Visa or MasterCard logo, won't cut it.
Then again, using credit is smart only if you can pay it off on time, all the time. A 2012 report found that more than half of millennials carried over a credit card balance — for which they were charged interest — during at least one month in the prior year, according to researchers at George Washington University School of Business.
If you don't have enough money on hand to pay down your entire balance, you could at least try to chip away at and pay off some of it this month, scraping together the extra cash by brown-bagging lunch, riding a bike in lieu of taking a cab or carpooling, for example. Every step toward reducing your revolving balance is a step toward improving your score.
People with multiple balances on multiple cards should consider paying off at least one balance in full, especially on higher interest cards: Your credit score takes into account not only your total balance but also how many cards have balances at all.
Of course, don't shirk other financial obligations in order to pay off debt. The new debt can simply subsume the old, creating new, equally terrible problems.
Increase your credit card debt limit.
Another easy rule of thumb to maintain a healthy credit history is to use less than 30% of your total credit limit at any moment, O'Connell said.
"A full 30% of your FICO score is based on your credit utilization or debt-to-credit ratio," she said. "How much of your available credit are you using at any given time? The higher your utilization, the lower credit score."
For example, a balance of $800 on a credit card with a limit of $1,000 would be 80% utilization — well above the recommended 30%.
If your current limit is so low that you would find it hard to follow this advice, you might consider trying something few people realize is an option: simply asking your card company for a higher limit.
"A $1,000 balance on a credit card with a $1,000 limit brings your utilization to 100%, but if you're able to increase your credit limit to $5,000, that $1,000 balance is suddenly only 20% of your credit line," O'Connell said.
A word of caution: Make sure to ask your card issuer directly whether your request will trigger a hard credit check — which could actually lower your credit score in the short term. You might be able to get the company to compromise, giving you a smaller limit increase while skipping the credit inquiry. Just be careful not to undo the benefits of a limit increase by starting to spend more after getting approved.
Can't get your limit increased? Try paying off your credit cards twice a month instead of once a month, which can also have the effect of lowering your utilization ratio.
Keep up with credit reports and file disputes over anything fishy.
Just like going to the doctor for an annual checkup helps prevent you from getting sick, getting and checking your credit report at least once a year — or more, if you think your identity has been stolen — is among the best ways to safeguard your credit score.
"Errors are common on credit reports and they can prove costly," O'Connell said. "A misreported overdue payment or misattributed account, for example, can cripple your credit through no fault of your own."
You can get your report for free at AnnualCreditReport.com, which will help you stay abreast of what debts and other data the three major U.S. credit rating agencies — Experian, TransUnion and Equifax — are using to calculate your score.
People who haven't checked their credit in awhile should pull all three free reports at once for comparison — and then, assuming all is well, they can start staggering their requests for each respective report by four months, to allow for year-round monitoring.
Remember that it's not just credit card debt that affects your credit score: Late student loan payments, medical debt and even late library books can hurt you.
If you see any errors at all, contact the credit agency to file a dispute, which is the first step to striking marks from your financial records.