The majority of millennials are struggling with their credit scores, and less than half of them are considered to have a prime or better score, which would make them eligible for a mortgage.
What’s more, millennials see higher delinquency rates on personal loans, a new study by credit reporting agency Experian found.
The National Association of Realtors say that according to one of its own studies, 86 percent of millennials rate buying a home as a good financial investment. But Experian’s new research reveals that just 15 percent of them actually have a mortgage, while 61 percent are either “near prime” or worse, and would need to boost their credit scores significantly in order to obtain acceptable rates when they take out a mortgage.
Even so, Experian chose to look at the positives of the report:
“This data presents good news for younger, thin file millennials interested in buying a home,” said Michele Raneri, vice president of analytics and business development at Experian. “We’re seeing that small changes in financial behaviors such as building a history of on-time payments and improved credit practices can help lenders shift from viewing millennials as high-risk to low-risk relatively quickly. Knowing where you stand from a credit perspective is critical to improving your financial well-being.”
For its study, Experian evaluated the credit scores, bankcard behavior and personal loan and mortgage trends of around 60 million millennial consumers, it said.
Experian says the average credit rating in the U.S. is 677, with most consumers getting closer to the prime level (between 661 and 780) as they get older. Younger millennials aged between 22 to 28 have an average score of 652, while older millennials aged 29 to 35 have an average score of 665.
“Often, young people start their credit journey with a couple of mistakes first, but in the end, these mistakes create opportunities to learn how to use and build credit responsibly,” said Rod Griffin, director of consumer education and awareness at Experian.
Millennial home buyers are, on average, 31 years old with an income of $64,000, Experian’s data shows. The average mortgage balance for a younger millennial (22 to 28) is $167,000 and $210,000 for an older millennial (29 to 35). Millennial home buyers are most prevalent in the South and West regions, according to the study.
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