Home > Credit Score > Millennials Have Low Credit Scores: Here’s What They Can Do About It

Comments 0 Comments

Have you heard? Millennials have the worst credit scores of any generation. The data point plays well with one of Americans’ favorite pastimes: discussing the dismal state of the nation’s youngest consumers.

The average 19- to 34-year-old has a credit score of 625, but it’s 650 for Gen X (35-49), 709 for baby boomers and the Greatest Generation (together, those generations include everyone older than 50). The national average is 667. The data comes from credit bureau Experian and uses the VantageScore 3.0 credit score range, which goes from 300 to 850.

Yes, millennials have the lowest average credit score of American adults, but that statistic is neither surprising nor helpful. Building a good credit score takes time, and having poor credit as a young person doesn’t mean you’ll always have poor credit. It’s like a bad haircut: You have to deal with it for a while, figure out how to make it work while it’s in the awkward stages, but eventually, by staying patient and resisting making decisions that can make a bad situation worse, it’ll grow out. (That works both ways: Having a great credit score now doesn’t mean you always will, just like someone with a great hairstyle can easily be set back with a poorly timed buzz cut.) We explain what a good credit score is here.

If you don’t have any credit to your name, it’s not impossible to get a credit card with no credit, but you’ll likely have to start with something like a secured credit card. If you use them smartly, credit cards can be great credit-building tools.

So, young people with not-so-great credit, here’s what you can do to improve your situation.

Pay Your Bills on Time

If you have credit cards or loans (student loans, probably), make the payments on time. Your payment history has the greatest impact on your credit scores. Setting your bills to autopay is a great way to ensure that happens, but you need to make sure you have enough money in the bank to cover those bills, and you also need to check to make sure the payments go through.

Keep Your Credit Card Balances Low

According to the Experian data, millennials had the lowest average credit card balance of any generation: $3,403. (National average is $5,340.) At the same time, millennials used more of their available credit than any other generation: 43%. (National average is 34%.) This indicates that millennials, on average, have lower credit limits than older consumers, so whether or not millennials can afford their credit card bills is irrelevant — what matters is that balance-to-limit ratio, which should be as low as possible if you want a good credit score.

It’s called credit utilization. Many experts say that keeping your credit card balances to less than 30% of your available credit is beneficial to your credit scores; 10% or lower is even better.

Be Patient

Gen X, baby boomers and the Greatest Generation have an advantage over millennials — time. The average age of your credit accounts plays a significant role in your credit scores (the older, the better), and even the most responsible young person can’t do much in that area if she’s only had access to credit for a few years.

Time has indirect consequences, too: The older you are, the more time you’ve had (theoretically) to save a down payment for a home and pay down education debt. Perhaps you’ve also had enough time to leave the financial mistakes of your 20s behind you.

Anyone who wants to improve his or her credit needs to recognize the value of patience, because building a great credit score typically doesn’t happen quickly. Doing the basics right, like paying bills on time and keeping your debt low, will help you establish a positive credit history, and the longer you maintain those habits, the better your score should get. Age only has so much effect on credit; it’s really about knowledge and decision-making.

You can be a millennial with excellent credit. You can also be a retiree with really bad credit — it’s all in how you manage things. Throughout your life, your credit scores will go up and down, and even if you encounter a financial disaster or two, you always have the opportunity to rehabilitate your credit standing. Wherever you stand now (you can get two free credit scores on Credit.com), use that knowledge to inform your financial decisions going forward, so you can build better credit and experience the benefits.

More on Credit Reports & Credit Scores:

Image: Stockbyte

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team