The largest generation of Americans has the lowest credit scores.
Millennials — those roughly defined as aged between 19 and 34 — have the lowest credit scores of any generation of Americans. They have an average credit score of 625 on an average debt of $52,120. By comparison, Generation X (aged 35 to 49) have a credit score of 650 on average debt of $125,000, while both baby boomers and the Greatest Generation (with a combined age of between 50 and 87) have credit scores of 709 on average debt of $87,438.
“It’s important to keep in mind that credit scores are built on credit experiences,” says Michele Raneri, vice president of analytics and business development at Experian, while talking about millennials. “While this generation has been slower to use credit, they have plenty of opportunities to build a positive credit history.”
The report — released by credit bureau Experian — was based on a statistically relevant sample of anonymous data from Experian’s consumer credit database. The VantageScore 3.0 — which ranges from 300 to 800 — was the credit score used in this study. Anything between 601 and 660 is regarded as fair credit, while poor credit is between 501 and 600 and bad credit is considered anything below 500, according to financial website Credit.com. But different lenders may have different criteria when it comes to lending money, and may approve borrowers with a credit score of below 700. (The U.S. Census Bureau estimates that millennials are projected to hit 75.3 million people this year, surpassing the projected 74.9 million boomers.)
The size of millennials as a group makes them a powerful (and growing) segment of society, Raneri says, but – in some cases, at least – they are taking on more debt than the next oldest cohort did at their age. Auto loans make up 14% of all recently opened accounts for millennials versus 1% for Generation X at the same age in 1998, for example. Similarly, student loans make up 24% of all new accounts for millennials, compared with 20% for their Generation X counterparts at a comparable age. However, fewer millennials in 2015 have a love for plastic, with only 27% of their recently opened accounts being bank cards, the report found, compared with 46% for their Generation X counterparts at the same age.
Some 36% of millennials have never owned a credit card, compared with 13% of Generation X and baby boomers, another recent study by CreditCards.com, a credit card comparison site, found. One possible reason for this is that the 2009 Credit CARD Act, or Credit Cardholders Bill of Rights, placed strict rules on marketing and issuing credit cards to young adults: Americans aged 21 and under must show proof of income to repay card loans or have an adult cosign if they want accounts in their own names. As their earnings improve, experts say more millennials will transition to credit cards for greater rewards and consumer protections. Credit cards also limit liability on stolen funds to $50 while liability is staggered for debit cards.