Project Overview

Both Gen Z (individuals ages 18-23) and Millennials (individuals ages 24-39) have credit scores ranging from 674 to 680 out of a scale from 300 to 850. While these scores are considered “average” or “good,” they are not great (Value Penguin [VP], 2021). In addition to mediocre scores, 46% of millennials feel their credit score is holding them back while 24% of millennials state they have never learned how to build good credit and 15% report their debt level as unmanageable. (Huntsberger, 2021; Marketwatch [MW], 2019).

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The reasons for these scores and sentiments are varied. A young adult just out of college may have no credit history or a limited one which results in a lower score (MW, 2018). The Card Act of 2009 required individuals under 21 years of age trying to obtain credit to have a cosigner if they were unable to show an independent means of income (MW 2019). “Although intended to prevent credit-card companies from taking advantage of students by signing them up for cards with high interest rates and credit lines they couldn’t afford, it also hindered many young adults from getting credit cards at all” (MW, 2019). In addition, young adults are often saddled with increased student loan debt and inflated living expenses competing with the limited resources they do have. The average individual in this age group already carries $4,322 in credit card debt alone, not including other financial obligations they may have. (VP, 2021).  Consequences of mismanaging a loan or credit card also may not be fully realized until a long-lasting financial mistake is made.

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Just as important as recognizing potential missteps is understanding that building and improving credit is a process. “While [one] can build up enough credit history in less than a year to generate a score, it takes years of smart credit use to get a good or excellent credit score” (The Balance, 2021). When it comes to increasing a credit score, the process can take from a month to as long as ten years. The factors vary given each person’s unique financial situation (Forbes Advisor, 2021b).

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Regardless of the reasons, choosing not to establish credit at a younger age or mismanaging the credit a person has can be costly and have far-reaching effects. When applying for a loan, a higher credit score will often result in a lower interest rate saving the borrower thousands of dollars over the course of the loan. Credit scores can affect the ability to rent an apartment, qualify for reduced deposits when setting up utilities and the ability to get lower rates on health and car insurance. In addition, many employers will run a credit check as a condition of an employment offer (MW, 2018).

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Educating young adults about the importance of establishing and maintaining good credit will help correct bad habits and give them strategies they can immediately start using to increase their credit scores. In applying the information learned, they will be able to achieve both their short and long-term financial goals at a much lower cost.