Why Millennials’ Credit Scores Are So Low

By Bobbi Rebell | September 3, 2015
stack of credit cards

Millennials get plenty of recognition for frugality and their desire to share everything from cars to clothes, but they also have the lowest average credit score of any generation, according to a new study.

The average millennial credit score is 625, and 28 percent of them are ranked below 579, says NerdWallet, a personal finance website. In the world of credit scores, anything above 660 (out of 850) is considered good.

Based on millennial credit habits, those scores may not improve.

Among the key issues: Some millennials (18-34-year olds) are shunning credit cards completely after hearing so many debt-related horror stories from the financial crisis. Others are applying for the wrong cards and getting rejected.

“Millennials are misunderstanding, or are simply unaware of, the benefits of credit cards,” says Sean McQuay, NerdWallet’s resident credit card expert.

Student Loan Debt

A recent study by Experian found that millennials are making student loan debt more of a priority. That’s in contrast to the previous generation, Gen X, which prioritized getting credit cards.

About a third of millennials have never even applied for a credit card, NerdWallet says. That means they are not building credit and will have a hard time when they need a credit history.

Millennials’ avoidance of getting into the credit card game will cost them in the long run. For example, solid credit score are needed to rent an apartment, get the best insurance rates or just get a loan.

Credit scores are even sometimes used to vet job candidates these days. Credit history is key for making grownup purchases – and the length of that history is a big part of your credit score.

The good news is that the majority of millennials have applied for a credit card. But when they do apply for credit, about half (48 percent) are motivated by an advertisement or promotion, according to NerdWallet’s research. That can lead to a bad fit.

For example, a millennial who doesn’t drive should not apply for a gas card. Credit cards are not one size fits all.

Ironically, NerdWallet’s study found that millennials with the lower FICO scores – between 300 and 579 – are applying for credit the most. Not surprisingly, they also get approved less frequently.

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