Living with credit

Millennials often are more financially insecure than they seem

Kelly Dilworth

For years, I’ve taken my good credit score for granted. I pay my monthly bills on time and have every intention of maintaining a high score so that I can access affordable credit and eventually buy a home.

But like many millennials my age, I’ve spent much of the past decade living uncomfortably close to the financial edge. One bad break or sudden misfortune and I could easily slide into default.

Like me, many millennials with spotless credit histories are closer to falling behind on their bills than their credit scores indicate, according to a recent study by the subprime lender Elevate. The reasons include relatively low incomes, meager savings, big student loan payments and insecure jobs.

“Millennial couples, even when they have prime credit, live in a world that looks more like they are non-prime,” the study authors wrote in the report. “The implication is that they are on the knife’s edge and could tip either way.”

Millennials use credit to make ends meet

For example, more than a quarter of the millennials it surveyed with good credit – 28 percent – admitted to regularly using credit cards and other loans just to make ends meet.

That’s a behavior that many experts say puts cardholders at risk of falling behind financially. If you can’t afford to pay for everyday expenses with cash, then you’re either living beyond your means or not making enough money each month to pay for basic essentials.

Around the same percentage of millennials with nonprime credit scores – 25 percent – also said they regularly turn to credit to plug financial gaps. So did 25 percent of Generation Xers with non-prime credit scores and 20 percent of baby boomers with lower scores.

Similarly, a substantial number of millennials surveyed – 20 percent of those with prime scores – said they frequently have to weather unexpected drops in income, putting their finances at risk. A slightly bigger percentage of millennials with credit scores under 700 – 23 percent – said the same. So did 19 percent of Generation Xers with non-prime credit scores and 13 percent of non-prime baby boomers.

“The trend that is emerging is that young couples (regardless of whether they are prime or nonprime) embark in life looking a lot like nonprime people,” the researchers wrote. “How they learn to manage things will likely set them on the financial trajectory of their lives.”

Despite my best efforts, my credit score is still at risk

As I read the survey’s results, I realized that I’m in a similar situation. I too could easily lose my credit standing – especially if I run into a stretch of bad luck and run out of resources at a time when multiple bills are due.

I don’t have any credit card debt now, but I don’t have a huge amount of savings either. If either my husband or I lost our gigs, we would almost certainly have to turn to our credit cards to help pay for household expenses – especially if it takes us more than a few months to replace the loss in income.

Similarly, we also regularly contend with big fluctuations in our monthly income, cutting into our ability to plan ahead for big expenses.

I freelance for a living, and some months, I make significantly less than I expected, which causes us to dip into our savings to pay for day care, groceries or other big expenses. Other months, I replenish our savings by earning significantly more than I predicted.

So far, we’ve been able to get away with our big expenses, such as our son’s preschool, and my uncertain income, because my husband has a decent job with health benefits. But once his contract ends this summer at the university where he works, he’ll need to land another job quickly – or we could easily get into financial trouble for which we’re unprepared.

We’re dealing with this uncertainty by putting a brake on our spending and working diligently to increase our savings. But I won’t take my good credit score for granted. Like many people in our situation, I am well aware of just how vulnerable I am to losing our financial footing.

See related: Millennials are less financial stressed now, Millennials’ credit card usage lags Gen-Xers’ as young adults, What millennials can teach us about credit

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