Millennials don’t understand how to build credit, study says

[the game]

It’s confirmed — Millennials don’t know how to increase their credit scores.

At least that’s what a study from LendEDU indicates. In it, 500 Millennials (ages 17–37) were asked questions regarding credit scores, and based on the results, it looks like Generation Y needs to do some credit homework.

Millennial misconception #1: Use a credit card more to build good credit

Almost half of millennials surveyed believe you can improve your credit score by using your credit card more. That is not true. But to be fair, thinking that you should use your credit card more to build your credit score is a general misconception that reaches beyond a millennial mindset. Plenty of baby boomers perpetuate the same misunderstanding about using credit cards more.

The reality is that a “high credit utilization rate” (translation: you use a credit card a lot) lowers your credit score because it makes you look like a bigger risk to lenders,

If you want to begin improving your credit score, you can start with the basics—buy only what you can afford, and pay off your credit card balance before the end of each month.

Millennial misconception #2: Max out and pay off a card to increase your score

When asked which behaviors would improve their credit scores, around 36% of millennials selected the following answer: “Maxing out, but paying a credit card on time.” This answer couldn’t be more wrong.

Maxing out a credit card can do serious damage to your credit score. When you max out your credit card, you get a “high credit utilization ratio” (translation: you’re using 100% of your available credit). The actual recommended credit utilization ratio is “below at least 30% and ideally [only] 10% of your total available credit limit(s).”

Besides the impact on your credit score, maxing out your credit card makes you susceptible to higher credit card interest, which can be 20% or more these days. Yikes!

Millennial misconception #3: Carry debt for a good credit score

Another 28% of millennials in the survey incorrectly believe “carrying debt is necessary for a good credit score.” It’s true that you can build up your credit score by taking on a bit of debt, but you’ll still need to pay the balance off each month and use less than 30% of your available credit.

Perhaps the best way to dispel these credit score misunderstandings is to go back to what actually makes up your credit score.

This is troubling. Hopefully someone with wisdom that comes with age can step in help this generation be more financially responsible

https://www.usatoday.com/story/money...ays/715240001/

[Deleted]

Instead of being taught how to gain credit scores, people should be taught how to avoid being slaves of banks and to stop using credit cards and stop taking on unnecessarily loans.

[Mindark]

How does this compare to the non-millennial populace?

[Lorgar Aurelian]

What good is. A survey of just an age group though? Wouldn't there be a ton of different variables to what any one in a age group could know. Things like there back ground, culture, family income level ect.

[God Save The King]

I love these 'millennial' surveys that don't compare the millennial age group to older generations. They did once in this article, and guess what? Older generations were no better. Most of these 'millennial' surveys, the outcomes aren't unique to millennials, they just omit results from other generations to make millennials look more idiotic than their predecessors.

Also the second and third points, only 36% and 28% of those surveyed answered in that way. How can you make massive, generation wide assumptions when your cherry picked data set doesn't even show a majority?

[Oneirophobia]

Instead of being taught how to gain credit scores, people should be taught how to avoid being slaves of banks and to stop using credit cards and stop taking on unnecessarily loans.

Which would more or less give you a good credit score, interestingly.

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I love these 'millennial' surveys that don't compare the millennial age group to older generations. They did once in this article, and guess what? Older generations were no better. Most of these 'millennial' surveys, the outcomes aren't unique to millennials, they just omit results from other generations to make millennials look more idiotic than their predecessors.

Also the second and third points, only 36% and 28% of those surveyed answered in that way. How can you make massive, generation wide assumptions when your cherry picked data set doesn't even show a majority?

It generates views and therefore ad revenue. The media has long since manufactured generational differences to get clicks and reads. If they came out and said "Breaking news: everyone is pretty much the same except for incremental familiarity with technology, which is... well, natural" they wouldn't then get to make bank off the next 90 articles about how terrible insert-generation-here is or isn't.

[Machismo]

Honestly, most millenials are taught these misconceptions by their parents. When it's all said and done, millenials are better at handling money and finances than older generations. They're going to need to be, those older generations wasted trillions of dollars that the millenials haven't even made yet.

[Antiganon]

Instead of being taught how to gain credit scores, people should be taught how to avoid being slaves of banks and to stop using credit cards and stop taking on unnecessarily loans.

Not possible in this day and age. In order to get a place to live, even a rental, most realtors or landlords require a credit check. Cars are similar, but you can reasonably save enough money to buy a used car with cash.

In terms of the study, it's bogus. 500 is not a sufficient sample size for polling purposes. Furthermore, the questions are not asking what the article asserts they are asking. Using you credit card more does not imply carrying a higher balance, only a higher frequency of transactions. Maxing out and paying off a card is also not a bad thing, the problem is having a credit check while the balance is unpaid. In terms of debt? You need to carry (and pay against) some debt, it is the entire means by which credit is built. The question doesn't ask anything about total debt or percentage of utilization, which are really the only thing that matters.

You want to build credit? Get someone to lend you a small amount of money, and prove you can pay it back on time. Repeat forever, increasing the borrowed amount over time as needed and available.

Not rocket science.

[Wiyld]

Wait so...

People who are young, have poorer understanding of a subject that is poorly communicated to us all, than their older peers who've had years of experience to figure it out??


I'm SHOCKED

[Sky High]

Part of building credit is going into debt, which is a hard pill for most people to shallow. I happen to have relatively low debt but most people my age have more to worry about then building credit.

[Ebalina]

Why do any one need to be able to have credit?

Why is that even a thing.
Americans are stupid Jesus Christ.

(Infracted)

[Souflikar]

Why do any one need to be able to have credit?

Why is that even a thing.
Americans are stupid Jesus Christ.

Grammar is hard isn't it? Seriously, you should get out in the real world more.

[Cantheal]

Why do any one need to be able to have credit?

Why is that even a thing.
Americans are stupid Jesus Christ.

Just for silly things, you know, like buying a house ect.....


Or one could not ever build any sort of history and continue to pay pay rent which is just someones house payment for them every month while you live there .....

Peopele *insert w/e country* are big stupid heads, Jesus Crishtopher!

[Barnabas]

This is troubling. Hopefully someone with wisdom that comes with age can step in help this generation be more financially responsible

https://www.usatoday.com/story/money...ays/715240001/

Not surprising at all. I'm an advocate for teaching kids in k-12 about money. The state wants to keep kids dumb instead so they become ignorant adults and don't have knowledge about money so the bankers can pull off the next economic issue with the most impact.

[Mindark]

Why do any one need to be able to have credit?

Why is that even a thing.
Americans are stupid Jesus Christ.

I want to buy a small condo for $200k, will you loan me money? I'll pay you back.

[Paula Deen]

Its not a matter of not knowing how it works I think, more, we have NO FUCKING MONEY OR TIME TO WORRY ABOUT THAT KIND OF THING!

[Cerus]

Instead of being taught how to gain credit scores, people should be taught how to avoid being slaves of banks and to stop using credit cards and stop taking on unnecessarily loans.

Good luck getting a mortgage without credit and good luck getting a good credit score without loans and credit cards.

Credit isn’t bad. It’s using it poorly that is. When my wife and I got married she had two credit cards. A credit union visa and a department store card. The visa had a $1000 limit after her having it for a decade and the department store card was $250. Her father is the one who taught her about credit which was basically don’t have it. She put some prescriptions on her visa every a month and then paid it off. She thought she had to use it to have it benefit her. Something her father told her was true. He never came into the 21st century where credit is mandatory for anyone who isn’t rich. He is still stuck in the economics of the 50s and 60s.

She never asked for an increase on her cards nor did she ever get an auto lone. Her credit score was in the very low 600s. The first thing we did after getting married was get as much of an increase as possible on her cards and take out an auto loan on a used car.

Her credit jumped into the 700s within six months. Auto loans are great credit builders as is having as much available credit as possible. Combined we now have close to $10,000 in available credit on all our credit lines and use roughly 5-10% at any given time.

People still think a department store card is all you need for good credit building when in fact it’s one of the worst. A real credit card is the next best thing followed by a bank or auto loan and then a mortgage. Lenders care about just a few things. How much credit you have, what kind and how much of it you’re using. How old your credit is and if you make your payments on time. And of course no collections. Many still believe bankruptcy will hurt your credit more the anything. Sure your credit worthiness takes a hit initially but it quickly rebounds and usually is better than before. Lenders know you can’t file again for many years so they are far more likely to get their money back.

As for the study. None of these are exclusive to kids. Most adults believe these including my denioe citizen in laws.

[Theinquisition]

Never thought I'd be defending millennials....sigh

No generations youth, has been taught how to manage their credit, this isn't exclusive to millennials

[Lorgar Aurelian]

Its not a matter of not knowing how it works I think, more, we have NO FUCKING MONEY OR TIME TO WORRY ABOUT THAT KIND OF THING!

How do you have no money or time? Surely if you have no time it's because your working surely if your working your making money.

[Bryntrollian]

I want to buy a small condo for $200k, will you loan me money? I'll pay you back.

You can't afford that condo, you should be living in a place you can pay for upfront without negatively impacting your ordinary expenses.


/s