Millennials and Credit: The Future of Finance

Millennials are struggling with good credit scores and with building credit. While some Gen Xers also struggle, baby boomers are for the most part doing well. It can be argued that millennials are the future of our financial world though, and what they do now may well determine the financial picture going forward.

Not all millennials are created equal though, and while there is a certain law of averages at work here, statistics often do not tell the whole story. However, the average credit score of those who are age 19 t0 34 is 625, while Gen Xers are at 650, and baby boomers at 709. However, nearly 43% of millennials have what is called a sub-prime score below 600. This means nearly half of them have obstacles that can prevent them from getting jobs, access to credit cards, loans, and mortgages, and even renting an apartment.

So what are the issues, and how do we fix them?

The Issue of Education

Many millennials have a poor financial education. While baby boomers were perhaps the most conscientious, Generation Xers did not always teach their children about money and finance as well as they should have. The housing crisis of 2008-2009 impacted many of them, but few millennials understand how credit scores work and how they are calculated.

Educating them on these things, and teaching them how to better manage both finances and credit is vital, and in the best interest of lenders as well if they want a responsible generation to work with.

Debt Thresholds

One thing that few millennials understand is that because they have limited income, their credit limits are often lower on credit cards and lines of credit. Still, debt thresholds matter. Maxing out cards right away is bad for your credit, and only using 30% or less of the credit you have available is ideal.

Many millennials are using higher thresholds out of necessity, and need to explore and understand both other options and consequences of poor credit behavior.

Credit Card use

The same is true of credit cards. Using them excessively hurts your credit score and keeping them paid off is much better. It is also much better from the perspective of interest rates. Lower credit means your interest rates are higher as well, so borrowing cost much more in the long term

Often in an emergency, a personal loan with a lower or equal interest rate will be better in both the short and long run. The improper use of credit cards often gets millennials in real trouble.

The Housing Crisis

What is the housing crisis? As more and more young people are searching for homes and apartments for rent, costs go up accordingly. It’s s simple case of supply and demand, but it makes housing less than affordable, causing one of two things. Either the individual overextends themselves to afford housing incurring debt to survive or they adopt a group living situation, staying with family or roommates until they can afford a place of their own.

This results in them not building good credit or developing bad credit depending on the situation they choose. Either way, their future financial abilities will be affected.


Another simple factor is age. Generally, as people get older, their credit gets better. Part of this is the simple age of the credit. If you have had the same credit card for ten years and taken care to pay on time, that has a much greater effect on your credit card than a card you have only had for two years.

Millennials tend to get credit cards later, use them less, and in many ways care less about credit. The issue again is that we are a consumer economy, but also that many things in addition to the ability to borrow and get a credit card are dependent on that single number.

What to Do

The solution is not a simple one. It involves education. Convincing millennials that credit matters and teaching them how the system works, how credit scores are arrived at, and why it matters to them is essential.

It’s about more than just the financial future of the next generation. It is about all of us, and what the buying power of millennials will be when it comes to homes, transportation, investments, and consumables our economy depends on.