Boost your credit score without going into debt

Millennials' low credit scores may be costing them in higher loan and insurance rates. But it's not that hard to boost credit scores over time without adding to the debt loads that four in 10 people under 35 say are "overwhelming."

Recent research by credit bureau Experian found people under 35 had an average credit score of 625, compared to 650 for Generation X and 709 for people 50 and over.

Scores in the low 600s indicate a high risk that a borrower will default. That means those who can get loans will pay more for them in higher interest rates. Insurers use credit data as well, so lower scores often mean higher insurance premiums.

Low scores also put millennials at a disadvantage when they want to buy a home because lenders prefer borrowers with a proven history of managing credit responsibly.

"It's going to be hard to explain to a lender that you're a good credit risk when you haven't demonstrated that behavior," said Michele Raneri, vice president of analytics for Experian.

Here's what you need to do to improve your scores:

Build a small emergency fund. Don't worry, at least for now, about guidelines that say you need three months' worth of expenses in your emergency fund. Even a few hundred dollars in a savings account can help you meet small shortfalls and ensure your bills get paid.

Automate your bill payments. Missed payments can knock your scores for a loop, especially if you have a "young" or "thin" credit file. People with several credit accounts that they've responsibly managed for many years typically won't suffer as much from a skipped payment as those who have only two or three accounts and whose credit history can be measured in months.

Get a few credit cards. Don't apply for them all at once, but do have more than one card (debit and prepaid cards don't count). If you can't qualify for a regular card, consider a secured card where you make a deposit at the issuing bank and get a credit limit of the same amount (often $200 to $1,000). Look for cards that report to all three credit bureaus. Nerdwallet, a financial comparison site, keeps an updated list of the best cards.

Use them. You must have and use credit accounts to build good scores, but that doesn't mean going into debt. Carrying a balance won't help your scores but will hurt your wallet. Charge no more than you can afford to pay in full each month, and use only a fraction of your available credit limit: 30 percent or less is good, 20 percent or less is better, 10 percent or less is best.

Manage your student loans. Installment loans, including student loans, can be a positive influence on your scores as long as you make the payments on time. If you're struggling, look into income-based payment plans for federal student loans. If you have private loans, ask your lender about your repayment options. Student Loan Borrower Assistance, a site run by the National Consumer Law Center, offers more information about managing education debt.