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Post-recession renters are older, more creditworthy

Brady Porche

Today’s renters are older and have stronger credit profiles compared to those who rented during the Great Recession, according to a new study by TransUnion.

The credit reporting agency said in December 38.6 percent of renters had prime or better credit scores in 2015. That’s a big change from 2009, when only 26.2 percent of renters could boast about having excellent credit.

Renters today are also more active in using credit than during the financial crisis. TransUnion found 28.7 percent of renters who moved into their homes in 2015 opened a new credit card by mid-2016. Only 12.4 percent of 2009 renters opened new cards by mid-2010. The portion of renters who obtained car loans also rose from 9 percent in 2009 to 17.2 percent in 2015.

Other data points suggest the credit improvement is attributable to changing attitudes toward renting among different age groups. TransUnion said the percentage of renters age 45 and older rose from 23.5 to 31.3 percent, while the proportion of 25 and younger renters declined from 22.6 to 20.3 percent.

“Following the recession, younger consumers may have been underemployed or have chosen to live at home with their parents,” Mike Doherty, senior vice president of TransUnion’s rental screening solutions group, said in a news release. “Older consumers may have opted to stay in a rental unit instead of purchasing a home.”

Doherty’s theory about younger consumers jibes with a new census data analysis conducted by real estate tracker Trulia. The study found 40 percent of Americans between the ages of 18 and 34 were living with their parents in 2015 — the highest percentage since 1940. Approximately 33 percent were still living at home prior to the recession.

The study shows today’s renters are better able to withstand the rapid rise of rental prices. RealtyTrac said in December 2015 the rise in rents was outpacing weekly wage growth in 57 percent of U.S. markets.

Renting long-term, however, can have a negative impact on renters’ credit scores. If rental prices continue to outpace earnings, that will eventually catch up to a lot of apartment and rental home dwellers.

Combine higher prices with a fresh rate hike from the Fed —  with more increases expected to come in the new year — and that could put further strain on renters who also carry high credit card balances, leading to increased payment delinquencies. Increasing mortgage rates and rental costs may be the push older renters need to reconsider buying a new home instead of renting.

Meanwhile, younger people who have yet to leave the nest may opt to stay put for as long as their parents will have them. Those who have been fortunate enough to find careers can save a bundle or wipe out their student loans by living rent-free for a while.

But those arrangements usually don’t last forever, and most people aspire to have places of their own anyway. Millennials, however, aren’t embracing homeownership as quickly as previous generations did. As older renters take the leap into homeownership, younger adults may fill up the apartments and condos left behind.

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