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Living with credit

Slow-paying millennials not so good with credit after all

Kelly Dilworth

The credit-shy millennial generation is having trouble paying its bills on time.

A Nov. 20 report from the credit reporting agency Experian found that a substantial number of 20-something borrowers are lapsing on their bill payments — and it’s showing in their credit scores.

In a comprehensive analysis of four demographic groups — the millennial generation (aged 19 to 29), Generation X (aged 30 to 46), baby boomers (aged 47 to 65) and the Greatest Generation (aged 66 and up) — Experian found that millennials have some of “the worst credit habits” around.

Millennials own fewer credit cards, on average, than older generations, and they also have lower levels of debt than their baby boomer parents or Generation X siblings. That, in turn, has helped recession-scarred millennials earn a reputation for anti-debt thrift — particularly when it comes to credit cards. However, just because they’ve earned a reputation for being thrifty doesn’t mean they’re being fiscally responsible.

According to Experian, the millennials who do have loans, including credit cards, tend to miss their payments more often than their baby boomer parents or Greatest Generation grandparents. And they are more likely to run up their cards and use a larger percentage of their credit limits than older generations.

In a recent interview with the New York Times’ Ann Carrns, Experian spokesman Rod Griffin noted: “It looks like they’re using a lot of credit, compared to what’s available to them.” (Millennials usually have lower credit limits than older borrowers due to their limited credit histories, which could partially explain why, overall, they have lower levels of credit card debt than everyone else.)

Being new to credit, millennials also tend to have lower credit scores than older generations (628 on average on the VantageScore scale) and, thus, are more likely to have a harder time securing affordable loans. (To be fair, Generation X is just as bad at managing credit. According to Experian, Generation Xers, many of whom are juggling young families and hefty mortgages, have missed loan payments more often than any other demographic group. They also have just slightly higher VantageScores — 653 on average — than millennials.)

“While this study looked at all four generations, we found that millennials are in need of the most guidance to improve and build their overall credit health,” said Experian’s Michele Raneri in a statement.

More debt, slower rates of payment


Experian’s most recent State of Credit Report isn’t the first study to find that millennials are less-than-perfect with the way they handle credit.

An October 2013 study from the American CPAs and the Ad Council, for example, found that more than a quarter of young adults aged 25 to 34 fell behind on at least one bill in the past year. And a January 2013 study from Ohio State found that Americans aged 28 to 33 tend to have significantly higher levels of credit card debt than their parents did at the same age and are in less of a hurry to pay it off.

“If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future,” said Ohio State professor Lucia Dunn in a news release. “Our projections are that the typical credit card holder among younger Americans who keeps a balance will die still in debt to credit card companies.”

Big bills, weak economy

Millennials aren’t entirely to blame for their poor financial records, however. A large percentage of this generation are still struggling with a historic amount of student loan debt — making it tough for recent college grads to make ends meet. (The American CPAs and Ad Council study found that nearly half of millennials admitted to having to resort to their credit cards to help pay for everyday expenses.) The cost of living is creeping up — making it harder for millennials to afford the financial milestones that their parents achieved at the same age. Credit is substantially harder to get, which helps explain, in part, why so few 20-somethings have a wallet full of cards.

And, most notably, a large fraction of millennials graduated college during (or just after) one of the deepest financial recessions in history and, as a result, have fallen behind in their careers thanks to a punishing job market and stagnant income growth.

That’s why I have a hard time reading Experian’s report in isolation. When you consider the terrible financial hand that today’s twentysomethings were dealt, it’s no wonder that a large number of millennials are having such a difficult time staying on top of their bills.

The Experian study doesn’t say whether millennials’ late loan payments are for credit cards, student loans or both. But I’d be willing to bet that high monthly student loan payments are contributing substantially to the percentage of late payments that are showing up on underemployed millennials’ reports.

It’s possible that some millennials have a more relaxed attitude toward paying their bills on time than their parents and grandparents. But it’s also possible that a large number of millennials are just having a harder time than most with keeping up with life’s steep financial demands.

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