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

[Deleted]

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.

Actually wrong. In pretty much every Western country I've purchased property in... the banks only do a check whether or not your balance is sufficient and whether or not you have a steady income. A bank makes money of loans, and them refusing loans for you to a buy a property only happens when you have too much debt, don't have the monthly means to pay off the house or you simply aren't a reliable individual when it comes to payments.

[Zogarth]

I never got the whole credit score thing anyway. I have never thought about anything like a "credit score" and honestly "building it" should not include anything except not being an idiot with your money, and not taking/having loans you can't pay back.

[TirielWoW]

The place where I work offers Secured Credit Cards and Loans precisely to help people build their credit back up. They also offer consolidation loans to help people pay down debt.

You can raise your credit score by quite a bit if you take out a secured card or loan.

[ghotihook]

Is this Credit Karma?
14 years as oldest credit line is only "good?"
On mine it lists 9+ years as excellent.

TransUnion. One of the Major 3.

[petej0]

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

No it wouldnt. If you dont "borrow" you dont establish any "credit".

[Tinykong]

We may be at a dispute of semantics right now. Your utilization has a memory of 1 report, taken monthly. You could be running a credit utilization of 0% currently, but the previous report is what is actually reflected. This is a memory of a snapshot in time of the previous report. And that memory will vary from month to month. Does it remember trends? No. This is the simplest way of adjusting your credit rating.

The phrase "utilization has no memory" means that high utilization will not have a lasting impact on your credit score. If you miss a payment, or have a serious delinquency, it can take years for your credit to recover. Your utilization impact is only as good or bad as whatever your last utilization was. It could be 100% last month, and 0% this month, and the 100% month will be completely forgotten in terms of the damage it did to your score.

My warning was of maxing your cards and paying them off. You are speaking in absolutes. One needs to be mindful to keep that window between those two as small as possible. Especially if this is habitual. Maxing your card out throughout the month and paying the balance in full when the statement comes, for example, is potentially very bad. However, maxing your card and immediately making a payment on it significantly minimizes a risk of it adversely affecting one's score. The risk increases depending on how habitual this behavior is. If the former is is practiced a few times a year (for example, taxes in april and christmas in december), then it will have very little effect on your credit score. However, if the former is practiced every month, then chances are higher than your credit score will always be adversely affected.

There is no risk of maxing and then paying off your cards because utilization has no memory. If you have $50,000 of available credit and use all of it, and then wait for your statement to generate and a utilization report to occur, your credit score will drop. Then, after that statement date, you pay off the card in full, so that when the next statement generates you have 0% utilization, your score will return to whatever it was prior to your maximized usage, give or take a few points.

Carrying a balance is not paying off your card. There are plenty of reasons why you might max out a card, say you have a big purchase to make and want to take advantage of cash back promotions, points, better warranties or a promotional 0% interest period. If you make that big purchase, then your statement rolls after it posts but before you've paid it off, your score is going to drop. Thankfully, since utilization has no memory, as soon as you pay off the card your score will return to normal.

If you're maxing out cards without the ability to pay for whatever you are buying with cash, that's not the same thing.

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It doesn't have a major impact, but available credit does have a minor impact on your current credit score. This is actually from my most recent credit report.

There are a lot of different factors and criteria for score generation, I certainly don't have any idea of what all of them are, and neither does anyone else. It requires a sophisticated algorithm to generate scores, and it's not like that information is openly available.

Utilization and available credit are essentially the same thing. The impact they have on your score is only as good or as bad as whatever it was the previous month. If you have high usage, your score will drop, but it will shoot back up as soon as you return to 0%.

If you miss a payment, or have an account closed as derogatory, it takes years to recover from that, which is much different from utilization only mattering for one billing cycle and having no historical impact.

[Hammerfest]

I think Millennials not understanding how to build credit could be a good thing.

[Jalatiphra]

lol in germany you go to a bank, if you have regular income you get a credit..
wtf this score system is insane....

[ghotihook]

I think Millennials not understanding how to build credit could be a good thing.

How is that a good thing?

[Magnagarde]

Why would you use a credit card in the first place, especially a shopping one, if you are bothered by the score at the end of the tunnel.

[Hammerfest]

How is that a good thing?

How is it a good thing to not worship at the altar of the almighty FICO score? Beats me.

[urasim]

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

Considering how important this topic is, it should be taught in schools instead of subjects like gender studies. Never understood why we teach such worthless topics instead of all the other important life lessons.

[Cantheal]

How is that a good thing?

Someone to pay for my rental property since it seems a fair amount are ok with renting and not owning which is good for us "idiots" that used credit responsibly and forever put us in this debt. Mortgage=putting $$ in the bank and Renting=dumping $ into a endless hole (to be fair in some cases renting is a better option but any financial advisor will in most cases recomend buying over renting)

[ghotihook]

How is it a good thing to not worship at the altar of the almighty FICO score? Beats me.

Weather you worship it or not, it's important in society right now. It is partial to determine what your interest rate is when buying a car or house. If it's important to society you should at least have some basic understanding how it works.

[Flarelaine]

Debit is inferior to credit from a security perspective (read this) and debit doesn't offer comparable rewards. Preferring debit is basically an acknowledgement of terrible impulse control.

Nonetheless, I prefer spending money I actually have.

[Hammerfest]

Weather you worship it or not, it's important in society right now.

I think more problems would be solved than created/maintained if people just lived within their means and avoided using credit.

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Debit is inferior to credit from a security perspective (read this) and debit doesn't offer comparable rewards. Preferring debit is basically an acknowledgement of terrible impulse control.

Good thing most debit cards can be ran as credit as well as debit.

[ghotihook]

I think more problems would be solved than created/maintained if people just lived within their means and avoided using credit.

Oh I agree 100% with this, but I also do not expect people to save up $200K for a house and pay cash. It's not realistic unless you live with your parents until you're in your 30s. As I've said before, the only debt that I find acceptable is student loans and mortgages.

[petej0]

Nonetheless, I prefer spending money I actually have.

Nobody is saying you cant do that with a credit card.

[Moonstream]

I find it interesting just how many people in here are against using a card.....

I mean, if you use it correctly aka pay off the statement balance every month; you are getting paid to use it really.

I have two cards that I mainly use, one offers rewards of 5% for a different category every quarter. If it's a category my purchase isn't going to fall under, I use my other card which is 2% back regardless. Pay off the balance (living in your means), which you would be doing with cash anyway, and you make a little to throw into some savings account or w/e. Just from a few clicks.

Having a card doesn't mean you need to go ham on it and max that puppy out.

[ghotihook]

I find it interesting just how many people in here are against using a card.....

I mean, if you use it correctly aka pay off the statement balance every month; you are getting paid to use it really.

I have two cards that I mainly use, one offers rewards of 5% for a different category every quarter. If it's a category my purchase isn't going to fall under, I use my other card which is 2% back regardless. Pay off the balance (living in your means), which you would be doing with cash anyway, and you make a little to throw into some savings account or w/e. Just from a few clicks.

Having a card doesn't mean you need to go ham on it and max that puppy out.

I think there is a lot of confusion here. I doubt there are a lot of people that are against cards 100% if it's paid off immediately. I thin what most people are against is using credit cards and paying interest on them. I actually am almost exclusively a cash user, but that has nothing to do with what's being discussed here. My reasons are psychological.