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First wave of Gen Z entering credit ranks

Millennials have long been the hot topic over the course of the past few years with researchers, brands and businesses all seeking to understand this large group of people. As they buy homes, start families and try to conquest their hefty student loan burdens, all will be watching. Still, there is a new crew coming of age. Enter Gen Z.

It is estimated that they make up ¼ of the U.S. population, and by 2020 they will account for 40% of all consumers. Understanding them will be critical to companies wanting to succeed in the next decade and beyond.

The oldest members of this next cohort are between the ages of 18 and 20, and the youngest are still in elementary school. But ultimately, they will be larger than the mystical Millennials, and that means more bodies, more buying power, more to learn.

Experian recently took a first look at the oldest members of this generation, seeking to gain insights into how they are beginning to use credit.

In regards to credit scores, the eldest Gen Z members sported a VantageScore® of 631 in 2016. By comparison, younger Millennials were at 626 and older Millennials were at 638.

Given their young age, Gen Z debt levels are low with an average debt-to-income at just 5.7%. Their tradelines largely consist of bankcards, auto and student loans. Their average income is at $33.8k. For their total annual plastic spend, data reveals this oldest group of Gen Z spent about $9.5k, slightly more than the younger Millennials who came in at roughly $9k.

Surprisingly, there was a very small group of Gen Z already on file with a mortgage, but this figure was less than .5%. Auto loans were also small, but likely to grow. Of those Gen Z members who have a credit file, an estimated 12% have an auto trade.

This is just the beginning, and as they age, their credit files will thicken, and more insights will be gained around how they are managing credit, debt and savings.

While they are young today, some studies say they already receive about $17 a week in allowance, equating to about $44 billion annually in purchase power in the U.S. Factor in their influence on parental or household purchases and the number could be closer to $200 billion!

For all brands, financial services companies included, it is obvious they will need to engage with this generation in not just a digital manner, but a mobile manner.

They are being raised in an era of instant, always-on access. They expect a quick, seamless and customized mobile experience.  Retailers have 8 seconds or less — err on the side of less — to capture their attention.

In general, marketers and lenders should consider the following suggestions:

  • Message with authenticity
  • Maintain a long-term vision
  • Connect them with something bigger
  • Provide education for financial literacy and of course
  • Keep up with technological advances.

Learn more by accessing our recorded webinar, A First Look at Gen Z and Credit.