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Many millennials lack a credit track record

Sep 12, 2017 Walt Wojciechowski

Many millennials lack a credit track record

Credit is the means by which businesses - both large and small - make decisions on who to lend to. However, with many young adults still living in their parents' home, determining creditworthiness has become increasingly difficult, particularly as it pertains to millennials.

An estimated 15 percent of millennials - generally considered as those who range between 18 and 35 years of age - still call their childhood home their primary place of residence, according to a recent survey conducted by the Pew Research Center. All things considered, 15 percent isn't a substantial share, but it is when compared to people from older generations when they were in their early 20s and 30s. For example, just 10 percent of Generation Xers lived with their folks at these ages and roughly the same percentage of baby boomers, at roughly 9 percent.

"15% of millennials live with their parents."

What's causing millennials' failure to launch? Theories abound, from an inability to find employment to racking up student loan debt. Either way, because many millennials aren't making many credit-related decisions, it's preventing them from gaining the credit they need to establish having the capability to make payments in a timely manner.

Millennials represent largest generation
They aren't exactly from a small generation either. Born between 1982 and 2000, millennials in the U.S. total approximately 83 million, according to numbers crunched by the Census Bureau. This makes them the largest generation in the country, outnumbering baby boomers by roughly 8 million.

Not only are many millennials lacking in credit history, but polls suggest that they may also be misinformed about certain aspects of the topic. For instance,  according to a LendEDU survey, 6 percent of millennials wrongly believe that missing a credit card payment can improve their score.

"It's only 6 percent, but it actually shocked us," research analyst Mike Brown, who authored the survey, told the New York Post. "They might think that by missing a payment they are gaming the system."

Nearly 1 in 5 millennials - 17 percent - thought missing a payment would have a negligible effect, the poll found.

"Approximately 1 in 4 millennials graduated from college."

Millennials most likely generation to have finished college
This isn't to suggest that millennials aren't well educated. To the contrary, according to polling data compiled by Investment Zen, 27 percent of 18- to 35-year-old women and 21 percent of men in the same age range have a bachelor's degree. This compares to 20 percent of Generation X and around 17 percent of baby boomers.

Financial guru Bill Hardekopf said the crux of the issue boils down to what is - or isn't - being taught in the classroom.

"I think in general we are doing a terrible job of educating young people about credit," Hardekopf told the Post. "We train young people to drive a car. We don't train them to handle money."

Even when millennials are living on their own and making payments, they're stressed by their financial situation. According to a poll conducted by PricewaterhouseCoopers, 41 percent of millennials find it hard to come up with the money they need to pay their monthly expenses.

What's the solution for businesses whose customers are increasingly made up of millennials? It may come in the form of alternative credit. Now used more frequently thanks to its reliability, alternative credit enables businesses to make more well informed credit decisions based upon how effective borrowers are in making their payments in a prompt manner. Microbilt offers the tools small businesses need to assess creditworthiness in a clear, easily discernable manner. Click here to learn more.