Millennials Struggle To Manage Credit While Boomers Express Confidence
America's population is in the midst of a major generational shift as Baby Boomers look toward retirement and a younger generation re-shapes the workforce. A national survey released today by loanDepot LLC, America's lender, suggests Americans may be facing a markedly changed financial landscape in the next decade as Millennials take a different approach to managing credit from the older generation.
The loanDepot study reveals a great divide between Millennial and Baby Boomer views about credit and their approach to managing it, with Millennials generally placing a lower value and priority on their credit score than Boomers:
Nearly three-fourths (73%) of Boomers believe maintaining a good credit score is very important compared to 59 percent of Millennials. Just under half of Millennials (48%) are aware of their credit score, compared to 60 percent of Boomers. Over one third (37%) of Millennials are confident in their ability to manage credit and say they do a great job at it compared with 53 percent of Boomers. Conversely, nearly a third of Millennials (27%) admit they could do better job or haven't done a good job managing their credit. Only 15 percent of Boomers say they could do a better job or haven't done a good job at managing credit. One segment of Millennials that does place a very high value on having a good credit score is Millennial homeowners. Sixty-three percent of Millennial home owners value having a good credit score, and 38 percent of Millennials who own a home consider themselves great with managing credit.
"Millennials have faced a far more challenging financial environment compared to that of previous generations, marked by record student loan debt, lower income levels and a tough job market," said Anthony Hsieh, CEO of loanDepot. "While it'll still be important for this generation to learn to manage credit successfully, there is no denying that as Millennials take the lead in driving the economy, having access to new and emerging technology-enabled financial solutions will be critical for lenders in serving this evolving population.”
MILLENNIALS BORROW, SPEND DIFFERENTLY
In addition to different mentalities towards credit scores, loanDepot's survey found differences in Millennial and Baby Boomer approaches to borrowing and spending. Nearly a quarter of Millennials (23%) would consolidate their credit card debt so that they could spend more, while only 12 percent of Boomers would do the same. Additionally, nearly twice as many Millennials (20%) are likely to take out a personal loan in the future compared to only 11 percent of Boomers.
When it comes to how they'd use the funds from a personal loan, both generations pointed to home improvement and debt consolidation among the top three uses. However, 29 percent of Millennials would use the money to pay for a wedding or a vacation, compared with only 13 percent of Boomers. Read more on CPA Practice Advisor.