Millennial With Bad Credit? You’re Not Alone

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May 18, 2016 by Harry Stoll

It’s no secret that the millennial generation (those between the ages of 18-36) is highly indebted. We can all think of some poor college graduate scraping by on a couple part time jobs or one job that won’t pay enough to cover the student loans owed. Maybe we know of a young couple that over-extended themselves, and failed to pay that car loan back on time. Many millennials begin a career in debt too much, and will miss a few payments on their loans. Too often, millennials fail to understand the negative impact on credit scoring when paying a couple bills a few weeks late now and then. Consequently, some millennials will find themselves considered “subprime.” If this has happened to you, don’t feel alone. If you’re a millennial, chances are that your credit score is “subprime”—bad enough to make lenders think twice about doing business with you.

According to the credit reporting agency, TransUnion, 43% of millennial borrowers have a credit score of 600 or below on the 300-850 VantageScore scale. A VantageScore differs from a FICO score, and its ranges, from lowest to highest are: subprime, near prime, low prime, high prime and super prime. Below 600, and you are considered subprime.


Millennial  (18-36)   43%
Generation X  (37-51)    33%
Baby Boomers  (52-70)  20%
Silent Generation ( 70+)  9%

Most Americans manage to buy a car, purchase a home, or invest in a business idea by borrowing money. However, since so many millennials are responsible for tens of thousands of dollars in student loans AND have a subprime credit score, there  is a high risk they will be turned down for a credit card or loan. At minimum, the millennial will find fewer financing choices and face significantly higher interest rates. A subprime score can also mean the millennial will have trouble leasing an apartment, or it may mean a higher auto insurance premium.

There are a few reasons for the millennials’ lower VantageScores, including the aforementioned student loan debt. One of the reasons for this phenomena is the fact that VantageScores improve as you age. Just 6% of millennials have credit scores considered super prime (781 to 850), but 34% of baby boomers and more than half of those in the silent generation have super prime scores.

At least some of that improvement comes from the consumer using a smaller portion of the credit available to them. According to TransUnion, the millennials use 79% of the credit available to them. Credit scores tend to reward consumers for using less of their available credit. As a comparison, the other generations range from 77% credit used for the Xer’s, 65% for the Boomers, and 51% for the silent generation.

Millennials already start with a shorter credit history, and they have the added challenge of having less credit available. According to the TransUnion report, the millennials owe an average of $47,089 on a total credit limit of $59,514. The biggest factors in a good credit score tend to be low credit utilization, on-time payments, a long credit history, and a mix of both revolving and installment accounts. All these factors tend to weigh against a young person scoring higher.

For millennials attempting to build up their credit scores, TransUnion VP Ken Chaplin, recommends having lower credit card balances because credit card balances tend to carry more weight in credit utilization scoring. He also recommends that young renters ask landlords to report rent payments to credit bureaus. This adds another type of credit to their reports. Not all scores use rental information, but some do, including VantageScores.

Founded in 1950, United Credit Service, Inc. Is a full service, licensed revenue cycle management and debt collection agency in Wisconsin providing effective, customized one on one management and recovery solutions for our business partners. Visit our website at , call 877-723-2902 or check out our YouTube video.


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