Studies show borrowers in their 20s and 30s are not only thinking more about their credit than they have in the past. They also appear to be significantly more concerned with credit than older generations are right now – perhaps because their lives aren’t nearly as settled.
According to new research released this year, borrowers in their 20s and 30s are not only thinking more about their credit than they have in the past. They also appear to be significantly more concerned with credit than older generations are right now – perhaps because their lives aren’t nearly as settled.
New research from Discover, for example, found millennials are significantly more likely than older generations to know where they fall on the credit spectrum. They’re also more likely to care about how their credit scores affect them.
More than half of millennials (65 percent) say checking their credit scores helps them make better financial decisions, Discover found. Just 39 percent of baby boomers, by contrast, agreed.
Meanwhile, 78 percent of millennials say their credit history directly affects their lives. Only 52 percent of Gen Xers and 35 percent of baby boomers, by contrast, said the same.
Today’s millennials are also more aware of their credit scores than they were just a few years ago. As free credit scores become easier than ever to get, the vast majority of borrowers between the ages of 18 and 34 (93 percent) are aware of their credit status – up from just 57 percent of young people in 2017.
See related: Credit cards that offer free credit scores
Millennials ‘fret’ over scores, feel insecure about financial choices
Other studies have found similar evidence that millennials are taking their credit more seriously.
Experian, for example, recently surveyed more than 2,000 borrowers between the ages of 18 and 38 and found that most young people in their 20s and 30s care a lot about their credit.
Eighty-two percent of respondents, for example, said they had checked their credit score at least once in the past three months. Meanwhile, 53 percent of respondents said it was important to them to “proactively increase” their score. Fifty-nine percent of millennial borrowers also admitted to fretting about their credit scores.
In addition, the survey found that younger borrowers ranked improving their credit scores as significantly more important than boosting their social media following.
Millennials also appear to be more concerned than other generations are about planning for their financial futures. A 2018 study by Northwestern Mutual, for example, found that millennials are significantly more than likely than older generations to say that they are disciplined about mapping out their financial plans.
The same study also found that millennials are more insecure than other generations are about the financial choices they are making: for example, 82 percent of millennials expressed the need to improve their current financial plans, compared to 73 percent of Gen Xers and 63 percent of Baby Boomers.
See related: Viewing your FICO score could help you improve it
Why do young people care so much about their credit?
The surveys’ findings underscore just how precarious many young people’s financial lives are as they reach new milestones with limited resources and budgets. One reason for why millennials report caring more about their credit than older generations is because their day-to-day lives are more deeply affected by their scores.
When you have a limited income and savings and few, if any, assets, a good credit score can make a huge difference in how much spending money you have available and how comfortably you can live.
If you need to rent an apartment, for example, your credit history can potentially make or break your ability to live in the location that you want – especially if you don’t have a family member available to co-sign your lease.
Similarly, many older millennials are finding that their ability to afford their first-choice home depends, in part, on the health of their credit scores. A lower credit score can significantly increase a borrower’s monthly payments – or put certain homes completely out of reach.
Your credit score also affects what kind of options you have available when your budget is limited or you’re temporarily short on cash. You need good to excellent credit, for example, to qualify for money-saving products, such as 0 percent APR credit cards. You also need good credit to qualify for high-earning cash back and travel cards.
Debt and other expenses are also squeezing millennials’ budgets
Millennials may also be more preoccupied with credit scores because they’re already juggling a significant amount of debt with rapidly rising living expenses – particularly in big cities.
According to a recent survey by Business Insider, more than half of millennials have at least some credit card debt. Around a quarter of millennials have a mortgage, just over 28 percent still have student loan debt and 41 percent have car loan debt.
Millennials also report being highly stressed by their levels of debt, Business Insider found. Roughly 68 percent of millennials with credit card debt, for example, reported feeling stressed about it and 72 percent of millennials with undergraduate student loan debt said it stressed them out.
Around half of millennials with mortgages or car loans also said they were stressed by their debt. Older generations, by contrast, reported much less stress about their loans.
See related: Building a mortgage-worthy credit profile
People in their 20s and 30s are often much more concerned about their finances than older generations, research shows, and are more interested in their credit scores – perhaps because they have less room in their budgets to afford a lower score.
Millennials’ concern about their credit scores doesn’t necessarily translate to higher scores overall, though. According to Experian, millennials’ credit scores have increased substantially in recent years, outpacing other generations.
However, millennials’ scores are still significantly lower, on average, than older generations’ scores – perhaps because they have much less experience with credit.