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The State of Millennial Credit

The State of Millennial Credit

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We recently wrote an article about the state of credit for 2013, but we wanted to add a little more because Experian changed things up a bit. The Fourth Annual State of Credit Report highlighted the highest and lowest credit scores and other related aspects, but they also highlighted these variables by four generations; the Greatest Generation, Baby Boomers, Generation X, and Millennials.

The study provided an in-depth analysis of these four generations featuring their credit scores, the number of credit cards they have, how much they are spending on those cards, and the occurrence of late payments. Let’s take a look at how these generations performed against one another.

Generational Credit Differences

*Note- Some argue that the exact generational dates differ because it changes with time, so the below refers to the common average agreed upon ranges.  


  Greatest Generation Baby Boomers Generation X Millennials
Vantage Score 735 700 653 628
Average Debt $23,245 $29,317 $30,039 $23,332
Average Number of Bankcards 1.9 2.66 2.13 1.57
Revolving Utilization Ratio 16% 30% 37% 37%
Late Payments .14 .33 .61 .58
Average Balance of Bankcards $3,044 $5,347 $5,343 $2,682

In the above table you see a few trends:

  • Greatest Generation (born before or mid 1940’s)- This generation has the best average credit score and also the lowest average debt.
  • Baby Boomers (born mid 1940’s to mid 1960’s)- This generation heavily relies on bankcards, racking up the highest balances of all generations, but are also able to manage their debts.
  • Generation X (born mid-to-late 1960’s to early 1980’s)- This group has an average debt amount, which is about 7.7% higher than the national average and is also the highest of all generations.
  • Millennials (born mid 1980’s to mid-to-late 1990’s) -Also known as Generation Y, this group has the lowest average credit scores and are beginning to develop bad credit habits early on.

What’s interesting about the results of this study (or maybe not, depending on your perspective) is that, in retrospect to generational life experiences, I think these stats all kind of make sense. See what industry experts and consumers alike had to say about the difference in generations and how they manage their credit during an Experian credit chat.

Who are the Millennials?

The Millennials are those aged 19-29, or born in the mid 80’s to the late 90’s. They grew up during the internet boom and the majority of them took classes that utilized computers and smart boards. Our digital savvy shakes the nerves of the older generations for fear of losing their jobs to a young “me-me-me-20-something.” Millennials are struggling to pay off student loan debt thanks to attending college during the most expensive tuition rate hikes and a rocky job market where an entry level, minimum wage position is likely the best option available.

When it comes to credit and how Millennials manage their finances, there are three key areas that are the most concerning:

  • They are slow to pay down debt and are frequently paying late, which means the odds of them having a savings account is slim-to-none
  • Their credit utilization is too high
  • The relationship between their low credit score and low debt

The good news about how Millennials are managing their credit is they have the longest number of years to improve their credit. The bad news is, old habits die hard (or so they say).

The Problem With Late Payments

Millennials reportedly have the second highest record of late payments. I’m sure that’s caused by a number of things such as unreasonably high debt attributed to student loans, a first mortgage, and a first vehicle purchase, but the poor job market and a lack of financial knowledge and discipline are also likely factors. No matter what the reason is, missing payments will cause anyone’s credit score to quickly plummet, especially for these Millennials who have the shortest credit history out of all the generations.

Credit and financial experts preach about the beauty of compound interest and advise everyone to save as soon as possible. Common sense tells me that if someone is paying their bills late or only paying the bare minimum each month, it’s not likely they are putting anything away into a savings or retirement account. Additionally, if you’re like me, anytime I would get a little bit of extra money I would put it towards debt or extracurriculars and not towards my savings. The rule of thumb is to save 10% of your income each month. You can even set up your accounts so that process is automated and you never have to worry about it.

Why Credit Utilization is so Important

If this is the first you’ve heard about credit utilization, chances are you’re a Millennial and that’s why you’re reading this article in the first place. In general, credit utilization is the amount of credit you are using compared to how much you have available to use (your total balances/total credit limits). I won’t go too far into this because we have a great article all about credit utilization, but experts suggest using 10% – 30% of your available credit. I think ten percent is a little bit of a stretch, but Millennials are using up 37% of their available credit lines.

I wrote an article about how I raised my credit score in 30 days by almost 100 points. The biggest contributor to that was my increase in payments that sent my utilization down by 19%. When you have a large credit line available to you, but you don’t use it, that tells lenders that you are not in a tight spot and that you don’t need the money, which essentially makes you low risk. In general with credit, you want to appear as low risk to all financial institutions.

Does Low Debt Mean High Credit? Not for Millennials

The relationship between the Millennial generation’s low credit score, low average balance of credit cards and low debt is very odd to me. Compare that with the Greatest Generation that has the lowest average debt (only $12 less than Millennials), but they have the highest credit score of all age groups. It’s common to associate no debt or low debt with high credit, right? Because surely that means that they paid off all their debt, which makes them low risk, so why would someone have low credit with a relatively low amount of debt? Here are my theories to this low credit, debt and low balance scenario:

  • In general, Millennials have had the shortest period of time to build credit and pay down debts. As you age, you’re financial status typically improves allowing you to pay more on any debts you owe.  Raises and promotions will bring in more income, marriage doubles your household income and you also get a little wiser about your financial situation and stop making stupid mistakes like buying a $3 coffee on credit because you don’t have cash on you.
  • The Greatest Generation has had decades to work towards paying down their debt, which, over time, as long as they missed very little payments and never let their accounts go into a delinquent status, allowed them to earn the trust of lenders.
  • They are still recovering from their mistakes as an 18 year-old. Who hasn’t messed up their credit with their first credit card? I know I did. My credit is now the best it’s ever been, but it’s also been almost 10 years since I was 18 and ruined my credit with my first credit card. I’m not saying it took almost 10 years to build it back up as I wasn’t worried about my credit until about 2 years ago, but it’s something to consider.
  • Student loans. Need I say more?

Solutions for our Millennials

I would suggest that Millennials not get ahead of themselves. Being in your 20’s can be an exciting time full of milestones such as graduation, marriage, children, and buying a home and a car, but doing everything at once will put you in the hole and maybe even cause you to file for bankruptcy before you hit thirty.

Try to put two payments a month towards each bill. That will hopefully cause you to pay more than the minimum due, but it also kind of says to your banks, “hey, I care about my debt so much that I’m putting any additional funds towards this bill.” Never ever let an account go into a delinquent status or miss any payments. The bill collectors will not go away, you cannot hide, and all consumers need good credit in order to achieve certain goals in the future.

Finally, above all, save. You don’t need a lot of money to open a simple savings account, but you have to start somewhere. Even if you can’t find a savings account you want because they require too much down, go ahead and open one at the local bank anyway -just make sure you can withdraw it at any time without penalties when you’re ready to transfer it to a better bank account with compounding interest.

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