Credit is a crucial component of your financial health and wellbeing. Without proper credit, it might be difficult, if not impossible to obtain the things you need throughout your life, such as a place to live, or a vehicle to drive. Throughout your life, you will be in different credit situations and your credit will be important for different reasons. To know what you need to do to get your credit where it needs to be, it is important to understand what your credit situation is likely to be at your specific stage in life.

Millennials

For millennials, the current goal is establishing and building a credit history. Those on the younger end of this generation may be experiencing their first taste of credit which often comes in the form of credit cards or student loans. The downside for this generation is that they have little credit history. This means even if the credit history they have is good, the lack of time and number of accounts may still lead to a lower score. The goal for credit during this stage in life should be to build it up enough to be able to qualify for home and car loans when the time for purchase arises. To do this, you will need to establish credit as soon as possible, always make payments on time, keep the overall debt amount low, and keep balances to limits low. It is also advisable to diversify credit as well between long-term debt like a student loan and revolving debt with a credit card.

Gen Xers

While Gen Xers have their credit significantly more established by this point in their lives, they are likely to rely on a good credit score the most. At this stage in life, you should be fine-tuning your credit, pushing it from fair to good or excellent. This jump in credit means significant savings when it comes to major purchases, paying down debt, or refinancing a home to get the lowest rates. The credit strategy at this point should be lowering the ratio of debt to open credit to 30% or less, continuing to pay bills on time, and making sure to avoid any blemishes on your credit record. Not only will having a higher credit score provide you with the freedom to make the purchase you want, but will also provide you with the greatest savings on interest.

Baby Boomers

When you see those significantly high credit scores, most often they belong to Baby Boomers. It is a reward for those who have spent many years paying their bills on time, managing their debts, and diversifying their accounts. What's interesting about credit with this generation, is that high debt does not necessarily lead to a lower credit score. Whether it is due to the fact that Boomers have so many other positive factors with their credit, or they have higher credit limits making the ratio lower, it seems that having a larger amount of debt at this age is not as penalized. But that doesn't mean that you should stop trying to maintain that good standing. A good credit score may help you to obtain the things you desire for your retirement. Continue to make timely payments and while it is ok to add debt, make sure that you have the income to stay on top of it and keep the ratio of debt to limits low.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. Sources

• https://www.marketwatch.com/story/almost-half-of-millennials-say-that-their-credit-scores-are-holding-them-back-2018-07-16
• https://www.credit.com/credit-reports/how-credit-impacts-your-day-to-day-life/
• https://www.businessinsider.com/how-your-credit-score-can-impact-your-life-2016-5
• https://www.experian.com/blogs/ask-experian/research/how-baby-boomers-have-top-credit-scores-and-tons-of-debt/#:~:text=When%20it%20comes%20to%20credit,points%20higher%20than%20Gen%20Xers.&text=%22If%20debt%20is%20being%20well,not%20tank%20your%20credit%20scores.%22

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