money Millennials are now savviest generation on credit scores
In the latest sign that millennials have come of financial age, this generation is now more likely to know their creditworthiness than their older counterparts, according to a new study from Discover.
More than 9 in 10 millennials are aware of their credit score this year, according to the company’s annual credit health survey it shared exclusively with Yahoo Finance. That compares with 8 in 10 for generation X and just under three-quarters for baby boomers.
Millennials’ understanding of credit scores – the numeric value used to predict how likely you are to repay debt – also has vastly improved in the last two years, jumping from 57% in 2017. That figure was 74% for gen X and 85% for boomers in 2017.
Why are millennials doing better?
Discover’s 2017 survey predicted the rise in awareness among millennials because the generation was more likely to check their score at the time. In the current survey, almost 2 in 3 millennials said checking their score helped them make smarter financial decisions.
“More people are taking the proactive step of checking their credit score,” said Stefanie O’Connell, a personal finance blogger, author and speaker in a conversation with Yahoo Finance. “People want to assess their long-term goals, properly manage their money, and build a better life around their priorities.”
Millennials are also more likely to be at the age when credit has become more important in their lives. Older generations who have accomplished these milestones may not need to open new credit obligations as often.
“When you're getting into a stage of life where you're making major life decisions,” O’Connell said, “like buying a home, or getting married, and joining finances, or leasing a car or any other milestone in which your credit is going to become really important, it's so helpful to have that information available to you and you can make better choices.”
Access to credit scores
It’s easier now than ever to actually get ahold of your credit score. Tools like Discover’s Credit Scorecard – launched in 2016 – allow both Discover customers and non-customers to check their credit score for free and automatically sends updates by email every 30 days.
Other credit card companies have followed Discover’s lead by regularly giving their customers access to their credit scores on their credit card or banking statements. Sites like Credit Karma and Credit Sesame along with the major credit reporting bureaus also offer Americans a peek at their credit scores for free.
“This data really shows us is the importance of accessibility and tools,” O’Connell said.
Credit score confusion
In spite of the increased awareness and information accessibility, the general population is still confused about the factors that actually make up a credit score.
Almost a quarter of respondents (23%) in Discover’s survey incorrectly said that checking their credit score negatively affects it. To a lesser extent, 18% erroneously believed that income has an impact on their score, while 15% mistakenly thought employment history also affects it.
To make it easier to understand, O’Connell suggests thinking of credit health as “the habits that you practice” regularly like monitoring your credit report for errors or suspicious activity, making on-time bill payments, maintaining low balances and limiting new credit to only when you need it.
As for your credit score, O’Connell said to consider it as “the outcome of that habit” and an important indicator of what's going on on a deeper level in our credit health.
Stephanie is a writer for Yahoo Finance. Follow her on Twitter @SJAsymkos.
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