When it comes to Millennials, the financial picture is less than glowing – including their credit scores. With 83.1 million young adults in our country between 18 and 34 years old (born between 1981 and 1997), Millennials are the largest demographic in U.S. history.
They’re also impossible to ignore since by 2025, they’ll make up about one-quarter of our total population and three-quarters of our workforce (about 53.5 million workers).
Still, research shows that Millennials are seriously stumbling when it comes to their credit scores, debt, and financial acumen.
Here are 25 facts about Millenials and debt, loans, and credit scores:
1. According to NerdWallet.com, the average Millennial credit score is only 628, the lowest of any age group in the country and significantly lower than the 700 average American FICO score.
2. Millennials may be young, but they’re already saddled with debt at an alarming rate, with an average of $23,332 in debt each. For reference, Gen X’ers have an average of $30,039 debt.
3. According to TransUnion, 43% of all Millennials have bad credit, considered subprime borrowers. The next highest group is Generation X with 33% bad credit, and only 20% of Baby Boomers.
4. Furthermore, only 6% of millennials have credit scores in the super prime (781 to 850) category, compared to 34% of Baby Boomers that achieve those credit score heights.
5. In fact, 28% of all Millennials have a credit score of 579 or lower. That’s one in four young people with a dismal credit score!
6. Other research shows that approximately 67% of all young adults under 30 have credit scores of 681 or less – two-thirds that don’t have good scores.
7. However, low credit scores may not be 100% their fault when we consider that the length of credit history makes up 15% of any person’s credit score. Of course, Millennials are far more likely to have shorter credit histories (and fewer accounts). So not only do they miss out on any score boost from seasoned credit lines, but missed payments or negative item wreak havoc on their score.
8. The most disturbing part is that Millennials seem to understand credit scores and credit reporting far less than any other generation, In fact, 44% of Millennials don’t even know what their credit score is right now, and only one in five have checked their credit report in the last year!
9. When they are granted new credit accounts, Millenials are also using it to rack up consumer debt at a higher rate than any generation. In fact, the average Millennial has $59,154 available credit but uses $47,089 of it – an astronomically high 79% credit utilization ratio.
10. While these numbers are averages, looking deeper, we see a different story. Since about one-third of Millennials have never even applied for a credit card (and have no credit card debt), we see a portion of this age group that has amassed huge debt loads.
11. Of course, it makes sense that Millennials are also applying for credit cards at a higher rate than any other demographic, exceeding the U.S. average.
12. As we documented, they’re spending more on their credit cards and credit lines once they’re approved. In fact, Millennials now have an average debt (not including mortgages) that equals 77% of their income, compared to the national average of 49%!
13. The burden of student loan debt weighs most heavily on Millennials these days, with student debt skyrocketing 56% in the last decade to nearly 1.2 trillion dollars.
14. 38% of Millennials carry student loan debt, and 42% of Millennial households have student debt.
15. The average graduate leaves school with nearly $30,000 in student loans. Among all Millennials, the average student loan balance of $17,200 with $351 in monthly payments.
16. But their debt doesn’t just come from investment in education, with 35% of this age group also carrying an auto loan. On average, Millennials with car loans owe $11,000 owed and pay an exorbitant $503 in monthly payments!
17. Furthermore, only 20% have a home loan, which can be considered “good debt.”
18. When they do apply for credit cards or new credit (like store retail accounts), almost half (48%) of Millennials do so as an impulse decision – on the spot at a store, sporting event, mailing offer, or when an offer pops up online, etc.
19. A high debt load puts a strain on their monthly budget, often preventing Millennials from buying their first home.
20. Where do Millennials live?50% of Millennials rent on their own,Only 26% own their home, condominium, etc.,21% of Millennials still live with their parents,and 3% live in military or student housing.
21. Additionally, between 2006 and 2013, the number of young adults living with their parents jumped 15%, which means an additional 10 million working-age people still living at home.
22. Millennials are now renting for an average of six years before they buy their first home.
23. In a Fannie Mae survey, Millennial renters gave their top reasons why they weren’t buying a home. 57% of respondents said that they weren’t buying for financial reasons, including:
- Insufficient credit score or history
- Affording the down payment or closing costs
- Insufficient income for monthly payments
- Too much existing debt
(That’s right – a credit score that’s too low is the #1 obstacle to home ownership according to Millennials, followed by saving for a down payment).
24. According to financial polls, 62% of Millennials have less than $1,000 saved – and 21% have no savings at all!
25. In fact, a recent survey by SurveyMonkey found that almost half of all adults age 18 to 34 spent more on coffee than they contribute to investing for retirement! It’s true – about 44% of females and 35% of male Millennials spend more at Starbucks than in their 401K or retirement planning.
Still, the news isn’t all negative when it comes to Millennial home ownership, as one in three (33%) homebuyers in 2017 are Millennials, and 68% of first-time buyers this year are in that age group.
Are you a Millennial and you’d like to improve your credit score? In college or just graduated and already facing debt? Or maybe your son or daughter needs some credit score help? Message us for a free consultation!