Yahoo Finance Credit Scores Are Rising for Millennials and Gen Z — What Boomers Can Learn From Them
If you want to buy a house, rent an apartment, take out a loan, buy a car, or get lower interest rates, good credit is a must. A low score (580 to 669 is considered fair, according to Equifax) can seriously impact your life — and it can take years to rebuild your credit. With the recent wave of layoffs and uncertain job security for many industries becoming the norm, younger generations are concerned about the economy and their finances, per Forbes.
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However, a recent report by Open Lending and TransUnion indicated millennials and Gen Zers have relatively good credit scores — with millennials averaging a credit score of 690 and Gen Zers averaging 680, Fortune reported. Here’s a closer look into why their credit scores are so healthy.
Younger Generations Start With No Debt
When you start with no debt and pay your bills, it’s easier to maintain a higher credit score, as Joseph Camberato — CEO of National Business Capital — told Fortune.
“When they handle their first credit card or auto loan responsibly by paying on time, their credit score shoots up quickly. This good track record makes it easier for them to get loans in the future,” Camberato said. “On the other hand, older generations like Gen X and baby boomers might have piled up more debt over the years, which takes longer to deal with on their credit reports. Plus, as they slow down on spending, they’re not as focused on boosting their credit.”
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Many Millennials and Gen Zers Are Thin-File Consumers
A thin-file consumer means you don’t have a lot of credit history. Open Lending encountered 1.85 million thin-file respondents (out of a total 4.35 million respondents) while conducting their research, of which 536,559 were millennials and 713,047 were members of Gen Z.
“Millennials and Gen Zers were twice as likely to be thin-file consumers than Gen Xers, baby boomers, and those in the silent generation,” the report stated. “Once they become established consumers, millennials and Gen Zers primarily have automotive loans, bank cards, credit cards, and student loans in their credit portfolios.”
Why Millennials and Gen Zers Advance Credit Tiers Faster
The report also examined the impact of millennials and Gen Zers moving into higher credit tiers more quickly than their older counterparts.
“The data in this study suggests that when millennials and Gen Zers advance credit tiers, they do so quicker than older consumers. Once millennial and Gen Z consumers move to a higher credit tier, they continue to prioritize car loans and have the potential for upward score mobility and changes to their financial well-being.”
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This article originally appeared on GOBankingRates.com: Credit Scores Are Rising for Millennials and Gen Z — What Boomers Can Learn From Them
