LendEDU just released the results of a new survey that uncovered how much millennials know about credit scores. They asked 500 millennial respondents (ages 17-37) 17 questions related to credit reporting, credit scores, and responsible credit usage.
Here a few highlights:
- 20.64% of millennials have never checked their credit score.
- 43.69% of millennials believe that you can improve your credit score by increasing your credit utilization, while 36.27% believe their credit score could be improved by maxing out, but paying a credit card on time. Only 17.23% knew they had to decrease their credit utilization.
- Some millennials believe that race (8.42%), or gender (8.22%), or political affiliation (8.82%) are factored into your credit score.
-4.81% of millennials would rather have a low credit score!
-57.58% of millennials have a FICO credit score that is either "fair" or "poor."
I had a chance to interview them to learn more.
Why do millennials have so many misconceptions about their credit score?
The most likely reason why millennials have so many misconceptions about their credit score is simply because of the lack of financial literacy education throughout their lives. LendEDU has conducted multiple financial-related polls that all point towards the same thing: We need to do a better job educating young Americans about financial topics and how to best utilize the various financial tools that surround their everyday lives.
Why is it important that young adults know their credit score?
It is important that young adults know their credit score because one, you should know where you stand financially so that why you can plan accordingly. Also, knowing your credit score can allow you to be more financially aggressive if you credit score is good and more financially conservative if your credit score is bad. For example, if you have a high credit score, maybe you can look to finally get a car by taking out an auto loan that has a low interest rate because of your excellent score.
What are some things that can build credit for young adults?
Young adults can build credit in a variety of ways. One, if they have student loans they should make sure they make timely payments. For many young Americans, student loan debt is the first type of debt they will incur so it is important to get off on the right foot. They can also look to open up a credit card or maybe even two. But, they must make sure to pay off their credit card balances on time and to keep their credit utilization low so that they can establish good credit with lenders.
If millennials have poor or damaged credit, how can they work to bring it up?
Similar to the above answer, millennials can work to bring their credit back up by repaying any loans they may have on time, especially student loans. Also, instead of carrying balances month-to-month on their credit card, they should try paying off their bills in full each month. Another great way to build up credit is to keep a low credit utilization so that lenders know you are not a risk to max out and not repay your credit card.
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