Turning Caution into Credit for Millennials

Monday, September 12 at 10:20 AM
Category: Personal Finance

The key for Millennials, and any cardholder, is to manage credit responsibly. 

LOWELL, Ark. – The Millennial generation witnessed the damage the Great Recession caused on their parents’ finances, and that lasting impact has caused many of them to exercise great caution in applying for and using credit cards.

A recent survey by NerdWallet shows as many as one-third of Millennials, often defined as those between the ages of 18 and 34, have never even applied for a credit card. This effort to protect their finances, however, could have the opposite effect of depriving them of a much-needed credit history.

Credit history is necessary because good credit scores help secure mortgage, auto and business loans – potentially at lower rates. They also are a factor in rental agreements and obtaining employment.

A financial resume of sorts, these scores are a reflection of consistent responsibility. Not having that history – for whatever reason – can reflect negatively on consumers of any age.

For young adults who are just entering the workforce, credit also is often used as a short-term safety net or as emergency funding. Many card issuers offer reward programs, making the benefits two-fold; while building a good credit history, the consumer earns rewards for use on products, services, travel and lodging.

The key for Millennials, and any cardholder, is to manage credit responsibly. NerdWallet showed that more than 30 million Millennials have bad credit scores – 600 or below – that could result in higher credit rates and fewer options when it comes to housing or auto loans. The process for improving a low score, demonstrated by consistent credit and payment performance, takes place over years.  

It’s important to begin building that history before it’s needed, and it will be needed. Scores take months – often years – to reach a level that will reward the consumer with loan approvals and lower rates.  

Millennials have a different, more frugal mindset than the generation before them that will likely have many benefits for them over time, but building a solid credit report and score, despite their caution toward credit products, is an important step that needs to be taken.

Tags: Credit Cards, Credit History, Credit Score, Financial Education, Press Release
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