Why Millennials and Gen Z Are Suffering From the Lowest Credit Scores

There are ways for these age groups to raise their scores.
  • Average 2018 FICO scores for millennials and post-millennials are the lowest among all demographic segments.
  • Reasons cited include few credit accounts, growing non-mortgage debt load and some delinquent student loan payments.
  • The main concerns are the record amount of average student loan balances and total student loan debt that has surpassed total credit card debt.

Although Americans now have the highest average FICO credit score ever, the youngest age group with credit has the lowest credit scores of all demographic segments. The 18-29 age group has an average credit score of 659, according to a 2018 FICO study. The good news is that that number is up five points on a year-over-year basis.

Here’s a look at why millennials and post-millennials have the lowest credit scores.

Why Millennials and Post-Millennials Have the Lowest Credit Scores

Credit scores are based on a number of factors. For a better understanding of why credit holders ages 18-29 are faring so poorly compared with other age groups, take a look at the following details.

Low Number of Credit Accounts

The post-millennial Generation Z — people born after 1996 — has the lowest amount of credit accounts, according to a 2017 Experian State of Credit report. This might partially explain the low average FICO score, as the number of credit accounts is one of many factors used to tabulate scores. Gen Z also has the lowest number of credit cards with an average of 1.44, the same report revealed.

Find Out: 3 Things to Do Now If You Have a 600 Credit Score

Non-Mortgage Debts

Beyond that, non-mortgage debt was pegged as a reason for Gen Z’s lower credit scores. This type of debt — which is up in general — includes credit card debt, car loans and student loans. For Gen Z, Experian noted this debt load has risen 15 percent, from $6,034 to $6,963. For millennials, non-mortgage debt has risen 9 percent.

Record Amounts of Student Debt

However, perhaps more worrying could be record amounts of student debt. As of 2017, the average student loan balance has climbed to $34,144, according to Experian. Total outstanding student loan debt stands at $1.6 trillion as of Nov. 7, 2018, according to the Federal Reserve — that number surpasses total credit card debt, which is $14.4 billion as of August.

Even worse, a study at the George Washington University School of Business found nearly two in five student loan borrowers have been late on at least one student loan payment over a 12-month period. A quarter of survey respondents have been late more than once.

See: 12 Ways Student Debt Hits Everyone’s Wallet

How Millennials and Post-Millennials Can Raise Their Credit Scores

Education might be the key for this youngest age group to improve their credit scores and pay down student debt. When people learn their scores as well as how to use credit responsibly, they tend to make better financial decisions and increase fiscal discipline, according to FICO. The credit reporting agency said more people can raise their scores by:

  • Paying all bills on time
  • Applying for credit only when necessary
  • Lowering total debt load

Keep reading to find out how to raise your credit score by 100 points (almost) overnight.

More on Credit Scores

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