There’s more to the ’80s and ’90s than the decline of disco and the birth of grunge and techno-pop music. Those who were born in those years have come of age during a short period defined by the Internet, a transformative mobile/digital revolution, and the Great Recession of the late 2000s, and these millennials are leaving their mark on the social and economic fabric of our society. They already dominate the workplace and Pew Research Center projects that by 2019 that millennials will become the largest living generation in the United States. Perhaps they’re your biggest customer today.
This hyper-social, massively mobile generation is changing the way we shop, pay, and manage our finances. And they’re finding that being smart about using credit is an important part of their financial wellbeing. But credit is complicated, difficult to navigate, and not a subject most people are taught growing up. Not only can good credit go a long way in securing a better car loan or mortgage, but it can also help you get the new cell phone you want and set up utility service with lower security deposits.
Despite all of this, the millennial generation has already jumped headlong into the wonderful world of debt. Young millennials are starting their careers with a mountain of college debt, and older millennials are starting families and trying to advance their careers. So how well are millennials doing managing their credit health?
Shouldering student loans, mortgage debt, and car loans
This generation faces the highest level of student debt in the country’s history with levels continuing to rise. Roughly 70 percent of grads leave college with student debt, and 44 million Americans hold $1.4 trillion in debt. According to an analysis by Experian, student loan debt is a major obstacle to saving for a home, and millennials with student debt tend to have larger mortgages on lower-value homes. Millennials’ mortgage debt was up 6.8% in 2017, from an average of $185,668 to $198,302. Auto loan debt, which as of 2018 totals more than $1.15 trillion, is of equal or greater concern.
A complicated relationship with credit cards
Coming of age during the Great Recession, many millennials tend to be more cautious about credit card debt. This does not, however, mean they are leveraging credit wisely, and their aversion to credit cards could actually work against them.
The average credit score of a younger millennial (aged 22-28) is just 652 and for older millennials (aged 29-35), just 665 according to an August 2018 report from Experian. Credit scores range from 300 – 850, and scores in the mid 600s—which is where millennials’ scores fall—are typically considered fair or merely good. This means they’ll likely have to pay more for everything from a mortgage to a credit card.
According to Experian’s director of consumer education and awareness Rod Griffin, this isn’t surprising given the fact that millennials haven’t had time to establish a credit history.
Millennials have a long way to go and a lot to learn. Many are falling into some bad credit card habits. According to a 2017 survey conducted by Lendedu, 31 percent millennials are dependent on credit cards for basic living expenses like rent, groceries, and utility bills. Thirty-six percent say they have maxed out their cards, Of the 29 percent that said they had missed a credit card payment, 18 percent thought their score would remain unchanged and 6 percent believed their score would go up.
Millennials seek education and guidance
Millennials, in particular, are careful about their finances and are looking for guidance and support. According to a recent survey by Discover and Research Now, 83 percent of millennials are actively trying to improve their credit scores, and this demographic checks their scores more often than other generations. In fact, 76 percent of millennials believe that checking their scores helps them make smarter financial decisions.
The bottom line
Financial literacy and credit education services that help simplify credit reports and give consumers the tools to check and monitor their credit scores can go a long way to improving millennials’ bottom line. According to Experian’s Rod Griffin, “Having good credit scores can save you money by having to pay lower interest rates, reduced activation fees, lower security deposits, and reduced insurance rates.”
With this new generation poised to control the most buying power the world has ever known, providing them the credit education they so desperately crave can only help your business.