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Even as Generation Z continues to shape the electoral and labor landscape of the US, analysts are still discovering new ways in which economic policy has hindered the trajectory of their predecessors, Millennials.
To be clear, some of the contributing factors are self-inflicted. Most experts seem to agree, for instance, that financial illiteracy is disproportionately high among this demographic—and this has reportedly been true for some time.
According to recent research penned by Dr. Francesca Ortegren of the University of Southern Indiana, only four in 10 Millennials know what interest means and even fewer can define APR. The remaining predictors can safely be contributed to macropolitical events, however.
In the wake of the great recession of 2007, a whole generation looked to higher education to give them an upper hand in a wounded job market. Of course, if everyone has a bachelor’s degree, no one functionally does. This isn’t how debt works though. In a paper authored by a team of researchers over at Chegg.org, one in three borrowers default on other bills so that they don’t default on their student loans.
You can’t declare bankruptcy on student loan debt, which means many college-educated Americans are working for less, taking on higher co-pays, and delaying personal milestones to justify degrees that were supposed to put them on the fast track to stability.
“Millennials are marrying at lower rates than previous generations. Only 26% of adults between the ages of 18 and 32 were married in 2013, compared to 36% in 1997 and 48% in 1980. At the same time, Millennials possess more debt, poverty, unemployment and lower personal wealth and income than their parents and grandparents did at their age,” The Women in the Housing & Real Estate Ecosystem reports.
Collectively, Millennials represent the fastest-growing debt load in the US.
In Experian’s 2020 State of Credit report, it was revealed that the average millennial consumer has roughly $27,251 in non-mortgage debt (revolving credit or installment loans, credit cards, student loans, car loans, and/or personal loans) and an additional $232,372 in homeowner debt.
“In what has been an unprecedented year, marked by a global pandemic and a number of economic and personal challenges for both businesses and consumers, Americans are maintaining healthy credit profiles during the COVID-19 pandemic,” the authors wrote in the new report. “This year’s report provided an extended view into how consumers are managing and repaying their debts; showing most Americans are practicing responsible credit management.”
This year’s in-depth look at American credit performance and borrowing behaviors did offer indicators worth some optimism. As a whole, the US is reducing utilization rates, credit card balances, and late payments compared to previous years.
“The average millennial’s VantageScore® is 658. While positive credit history is one factor in determining your credit score, it’s not the only one, so millennials can’t exactly blame their mediocre scores on their youth,” writes personal finance expert, Megan DeMatteo.
“With a score of 658, millennials sit right on the cusp of having a prime credit score, which can help improve their chances of getting approved for the best financial products and interest rates. The difference between having a 658 credit score and one higher than 660 is significant and well worth working toward.”
Below are DeMatteo’s five-step guide to improving your credit score:
1. Make on-time payments
2. Set up autopay
3. Limit new accounts
4. Keep an eye on your credit utilization rate
5. Get credit for paying other bills