It’s no secret that Millenials tend to get a bad rap. They’re looked down on by the older generations who claim they are entitled, lazy and given monikers like the “I Want it Now” generation. Whether you’re a Millenial working hard to buck those stereotypes, or you’re stuck in them, you don’t have to let yourself be a victim of circumstances.
There is a big problem. Millennials, especially those still in their 20’s, have lower credit scores than other age groups. This is partially caused by them not having as long to build their credit. But it’s also a result of Millennials misusing their credit. It’s hard to build credit when your credit is damaged, especially when you’re young without access to many of the resources others have.
Here’s what we know.
Those in their 20’s (Generally) have Low Credit
First, the good news. According to the latest Experian State of Credit report, 2017 had the highest average credit (across the board) than ever before. For the first time ever there were more Americans with very high scores than those with very low scores.
The bad news, the average score for those in their 20’s was lower than the national average.
Those in their 20’s don’t fall neatly into a generation. Individuals in the early years of this decade are considered Generation Z; whereas those in the second half of this decade are Generation Y, or as we commonly know them: Millenials. The real issue, however, isn’t the label. It’s the fact that for those who are in these generations, the average credit score is 634-638. How does that rank in the world of credit?
What is considered a good credit score?
Credit scores range from 300 to 850. Those who have scores between 300 and 579 have very poor credit and are considered deep subprime. In other words, they’re going to have a hard time getting a loan, and if they do land one it’s going to cost a lot.
Scores that range from 580 to 669 are considered fair, but those borrowers with these scores are still considered to be subprime. The average score for people in their 20’s fall right in the middle of this category.
Scores from 670 to 739 are considered good, and those who hold these scores are very unlikely to default on loans.
When you get to 740 – 799 you hit the very good category and you’re privy to better than average rates.
800 to 850 is exceptional allowing you the best rates possible.
What we know from the reports on who holds the better average credit scores (statistically speaking the older you are the better your score will be) seems to indicate that the only thing we can do is wait until we are older to see credit score improvements. This isn’t quite true. There are people in their 20’s that have much better than average credit.
Sometimes, you have to repair your credit in order to be above average.
You Can Repair Your Credit
It happens to millions of new adults every year. They turn 18 and suddenly a world of financial opportunities opens up. Some of those opportunities come in the form of a credit card. With little education on how interest rates work, how paying off your card works, and without coaching on how to avoid getting deep into debt, many of those newly 18-year-olds rack up so much debt they damage their newly formed credit. That damage sticks with them into their 20’s (and sometimes beyond).
When it comes time to buy a house or a car they realize that their credit is not quite where it should be, and they’re searching for “how to fix my credit”. And there are a couple of ways to do that.
One route you can take is a hands-on approach that can take many years. You analyze what goes into your credit score (credit history, usage, late payments, and more). You learn how to use loans to your advantage making payments on time every month. And you wait until your score ticks back up.
Also Read: How to Get Your Credit Score Up Fast
The second route is more of a hands-off approach. Using a credit repair company, you pay a small fee in order to bring your score up. Once that score is up, you have access to better interest rates which can save you thousands of dollars in the long run.
20-Somethings Have Lower-than-Average Credit
It may not be appealing, but it’s nothing new. Younger people have lower credit, on average than those who are older. But you can be better than average and enjoy the better interest rates that come with a higher credit score. If you have damaged your credit, it’s ok. It can be fixed with a little time and hard work.
