Why Millennials Have Trouble Building Credit - Refresh Financial

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Why Millennials Have Trouble Building Credit


Remember that feeling you had about your parents while you were growing up? You know the one - the feeling they had everything under control and could handle anything that came their way? Even if it wasn’t true, we had faith in our folks to take care of everything that needed taking care of. What’s more, we thought we would be just like that when we grew up.

Something has happened with millennials, though. Something was lost along the way, because while their parents’ generation weren’t the best with money, they still managed to have credit, buy homes and build some kind of wealth. Many have retired relatively comfortably. This has not been passed along to millennials though, as studies suggest only 2% of millennials have excellent credit.

Here are the top 4 reasons millennials have trouble building credit:

1. Lack of credit cards

The first is that millennials don’t seem all that interested in credit cards. The New York Times recently looked into credit data and found that the amount of credit card debt people hold who are 35 or younger is at its lowest since 1989. That fact, combined with the fact we now know only 2% of millennials have excellent credit is a pretty good indicator that millennials just don’t use credit the way generations before them did.

2. Age

Millennials are also young, giving them less time to establish diverse credit. Some millennials may not have any credit products at all with which to calculate a credit score. Others may not have had or used credit products for long enough to have excellent credit. As we all know, it takes time to build up credit that goes beyond just good, and becomes excellent. Younger people also tend not to have quite matured to a penny-pinching, credit-building wealth machine that is planning for retirement. More lackadaisical in their approach to life, credit may only just be popping onto their radar now...

3. Financial crisis

Another reason millennials may not have good credit, is because they were just becoming adults or even still teenagers when the economic crises of 2008 hit, and even though the crisis was centered in the U.S.A., it had a huge impact on Canadians as well. It was a time when tougher credit rules were being implemented and the future of credit seemed unknowable. Millennials may have been denied credit over and over again and perhaps they gave up. Perhaps, also, they never tried after witnessing the credit crises of other people.

4. House prices have skyrocketed

In Canada, specifically, millennials began their adulthood during a period of time when housing prices were booming and the cost of living in Canada’s major cities was becoming unsustainable. Owning a home without serious help from loved ones was something that was just not realistic. Many millennials have been discouraged from homebuying and don’t have mortgages as a result.

The various reasons why millennials seem to have bad credit make sense, but it will be interesting to see if, over time, their credit improves. As they get older and more mature, millennials may wish to build their wealth and credit scores.

Why do you think millennials have such poor credit? Let us know in the comments!

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