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

[ghotihook]

Buying from credit will never save you money, as you are paying interest on everything you spend.


If you don't make enough cash to buy everything you need and instead you pay from credit, that's a one way road to going broke.
If you mean specifically "cash" as opposed to electric transactions, there is nothing wrong with using debit cards.

See that's the biggest problem I see right now. The only thing I feel you should go in debt for is student loans and a mortgage. Everything else should be paid with Cash/debit card.

[melodramocracy]

Buying from credit will never save you money, as you are paying interest on everything you spend.

False.

/10char

[Deleted]

False.
/10char

Okay, then tell me how do you SAVE money.

[melodramocracy]

See that's the biggest problem I see right now. The only thing I feel you should go in debt for is student loans and a mortgage. Everything else should be paid with Cash/debit card.

Honestly, shelter isn't something anyone should be in debt to have access to.

[gushDH]

Yet another statistics result. Relation doesn't mean causation.

[zenkai]

Buying from credit will never save you money, as you are paying interest on everything you spend.


If you don't make enough cash to buy everything you need and instead you pay from credit, that's a one way road to going broke.
If you mean specifically "cash" as opposed to electric transactions, there is nothing wrong with using debit cards.

I would think the people who need to build credit are the ones who can't buy homes and sometimes cars with straight up cash. You also need credit if you want to rent an apartment. Good credit can also save you money on car insurance

[melodramocracy]

Okay, then tell me how do you SAVE money.

You save money

a) when the interest you earn elsewhere is higher than what you're paying via credit. I have several retailer-specific cards that frequently run zero interest for x months deals, so if I want something significant from one of these retailers, you can be sure I'll use that option. Put the rest of the money into something that accrues interest for the rest of the duration or whatever you like

b) leveraging cash back cards and paying off the full bill on a monthly basis. Zero interest paid, 1-2% or whatever generated, which can add up pretty well depending on how much you use the card.

[Mehrunes]

Baseless and dumb study. The problem is that :

a. Credit scores in the USA is a dated system and it doesn't even work accurately either.
b. Millennials are exploited in the USA when it comes to the amount of pay they receive for the work they do.

In my country we have a simply system you are on a whitelist or a blacklist (there's no in between or degrees of how good/bad your credit is).

a. Whitelist : Steady employment, no excessive accumulation of debt with one or multiple banks, good track record with payments.
b. Blacklist : On and off employment, excessive accumulation of debt with one or multiple banks, bad track record with payments.

Just want to point out that as an European i find this system of credit rating tied to scoring points, completely absurd.

Yeah, gotta agree with this. Especially the part where in credit score system having no unnecessary loans, and as such no credit rating, is somehow worse than having bad credit even if you're not behind on your bills and have a steady employment with enough disposable income that'd allow you to safely pay off the loan.

Are you sincere in advocating that people shouldn't utilize credit cards? From a convenience and security perspective, credit utilization is a better approach than literally carrying a wad of cash around.

From an individual advice perspective, good use of rewards credit cards comes with quite a few perks and little or no downside for people that are financially competent.

Nothing in @Carbix's post specifically points to cash. Debit cards offer the same convenience, security and sometimes perks (this one may wildly vary depending on your area or even bank) as credit cards (though as far as security is concerned, US cards of any kind are generally barely above those wads of cash) while also being covered by what they said.

[ghotihook]

Honestly, shelter isn't something anyone should be in debt to have access to.

I kind of agree, and that's why I chose to live at home until I was 25. But you don't NEED to, just a lot of people prefer it. You can definitely rent your entire life and not accrue any debt from shelter, which brings us to the rent/own debate. I count it as not only do I have full ownership of the property, but it's also an investment. I was willing to invest (go into debt), to help me in the future.

[Cantheal]

in most countrys u cannot buy a house if you dont have the money for it. In my area, most people who want a house, built it.

Well I can only speak for the US but a quick Google shows MANY MANY Mortgage companies and lending institutions and varied programs across Eu and the "most" you speak of I am very curious about where one would draw that conclusion as it is nowhere near the truth here and would be very suprised that over 50% of the home owners across the EU either built or paid full sum for their home but would be intersting to read about that

IDK but really my point is doing basic things and being responsible with credit lets you do things like rather than paying rent for say 10yrs @ 1k a month and having nothing is not as sound as buying @850 a month for 10 yrs and at the end owning a asset worth 200k+

I just do not get the upside and you have to have some sort of history to allow one to do so. Totally open to hearing upside of NOT doing so just due to the fact I can't rationalize it in my head.

If it is a good or bad thing bills down to the person using it and how they use it. Ya it can be a trap if you are not responsible but if you arer it is a huge advatage.

[rayden54]

Some of this is plain wrong.

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

A high credit utilization rate doesn't mean "you use a credit card a lot." It means you use a lot of your available credit.

[Holofernes]

the credit is for the plot of land, the house is built by the guy who wants it (and the architect / companies he orders). Mortgage is not given the way it is in the Us, banks do demand securities. One example for getting the land: you wont get credit if u cant pay 20 % of the land on your own as cash, and the bank has full rights to the land until its payed off, and you need an stable income that is 3 times the rate. The house you built is on top of that.

Buying a house that already exists is always extremely expensive compared to building it, the difference is 50 % (if u calculate out the land cost). The most value of a house is not the house itself, its the area it stands on. Land is extremely expensive. Only really rich / good earning people can afford to buy a existing house, most young families that want a house, built it in an area where land is affordable to them.

[Vash The Stampede]

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.

This, so much. To build credit you have to be in debt, which in itself is a foolish move. Not to say Millennials aren't in debt, but they know enough how to avoid getting deep enough in debt so it doesn't punish them. And the credit score system, which at this point might as well be an achievement system for banks, is a score system that doesn't apply to people who don't intend to buy homes and buy new cars. If you work for minimum wage and live with mom and dad then why care about your credit score?

[Pony Soldier]

I don't get it though because it says using your credit card more is a misconception but then it says "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.". Soooo wouldn't using it more in fact improve your score in the end then if you pay before the end of each month? Am I looking at this wrong?

[Deleted]

You save money
a) when the interest you earn elsewhere is higher than what you're paying via credit. I have several retailer-specific cards that frequently run zero interest for x months deals, so if I want something significant from one of these retailers, you can be sure I'll use that option. Put the rest of the money into something that accrues interest for the rest of the duration or whatever you like

b) leveraging cash back cards and paying off the full bill on a monthly basis. Zero interest paid, 1-2% or whatever generated, which can add up pretty well depending on how much you use the card.

Interest earned on money that you don't have locked down on a 12 month+ plan is laughably small. I doubt you get more than a dollar or two on a month of interest, and involves plenty of micromanaging your money that costs you time.

[melodramocracy]

Interest earned on money that you don't have locked down on a 12 month+ plan is laughably small. I doubt you get more than a dollar or two on a month of interest, and involves plenty of micromanaging your money that costs you time.

It's still more than you had before. And really takes no time at all to maintain. You could be investing that money for larger gains too (potentially).

- - - Updated - - -

This, so much. To build credit you have to be in debt, which in itself is a foolish move. Not to say Millennials aren't in debt, but they know enough how to avoid getting deep enough in debt so it doesn't punish them. And the credit score system, which at this point might as well be an achievement system for banks, is a score system that doesn't apply to people who don't intend to buy homes and buy new cars. If you work for minimum wage and live with mom and dad then why care about your credit score?

This is a myth, please stop re-posting it.

[ghotihook]

Interest earned on money that you don't have locked down on a 12 month+ plan is laughably small. I doubt you get more than a dollar or two on a month of interest, and involves plenty of micromanaging your money that costs you time.

Yea, I get $1 per $1000 in my liquid saving account per month. It's pretty pathetic.

[Adam Jensen]

Then maybe schools shouldn't have dumped home economics and civics classes. Can't handle credit or change a tire, but I can FOIL a polynomial like a boss!

[Flurryfang]

Nobody under the age of 30 knew how to build up credit. This is nothing new. Have heard many stories about parents of my friends getting a surprise, when they found out that they had something called credit.

[ghotihook]

Then maybe schools shouldn't have dumped home economics and civics classes. Can't handle credit or change a tire, but I can FOIL a polynomial like a boss!

I agree 100%. We need much more real life skills and planning than classes that have little to no practical use.