Young people don't understand how credit works
Millennials are a savvy bunch. An age group comprised of those born at the close of the last century, millennials (roughly ages 18 to 34) grew up during the advent of the Internet age. It’s impossible to understate how much the last 30 years of advances in information technology have impacted the former “Generation Y” (sometimes known as the Boomerang Generation or the Peter Pan Generation due their increased tendency to delay “adult” milestones, such as living on their own, getting married, and starting a long-term career).
Millennials grew up accustomed to the notion of free, instantaneous access to knowledge. You could argue whether or not this access has actually made them knowledgeable, but it has certainly given them an unmistakable confidence in their ability to know things they deem worth knowing.
So it’s interesting to find that when it comes to credit reports, millennials know the absolute least.
That’s according to a new study conducted by the Consumer Federation of America and VantageScore Solutions, which found that when it comes to credit reports and credit scores, millennials know significantly less than older generations.
One of the findings: that only half of millennials have ever reviewed a copy of their credit report, which is significantly lower than older age groups.
Additionally, the study found that, where credit scoring is concerned, millennials have a lot of bad information. Millennials were found to make the following incorrect assumptions about credit scoring far more often than their older counterparts:
- That age is a factor in your credit score
- That the government is in charge of credit reporting and scoring
- That credit repair services can legitimately fix poor credit scores
When presented with a list of options, only 6 percent of millennials were able to accurately select the factors that are considered as part of your credit score. Meanwhile, only 18 percent were aware that their credit report could impact their ability to get a job, find an apartment, sign up for certain utilities, qualify for certain insurance policies, and more.
While it’s certainly not a good thing to see any group lagging behind when it comes to something as important as credit, it’s somewhat understandable that millennials are at the bottom of the list. They’re the youngest, least experienced age group represented and unfortunately, practical financial education (including subjects like credit reports and credit scores) is still very rarely taught in school.
That means that most millennials, like Generation X and the baby boomers before them, learn about credit through direct life experience. You could also make the argument that millennials – largely raised in a culture of excessive consumption – not only failed to receive the financial training they needed, but were actually inundated with a significant stream of messages that preached that exact opposite of what they needed to know about credit and money.
The plight of millennials serves to emphasize the fact that we are not doing enough to prepare the next generation to handle their finances. Financial education is a lifelong pursuit, one that should start at the kitchen table and extend through grade school classrooms. For the sake of millennials and all generations to come, it’s imperative that young people are exposed to financial topics early and often.