Once denied credit, six out of ten millennials give up for at least a year, according to a new study by Money 20/20—ID Analytics. Millennials are typically denied credit even if they make enough to make payments or repay debt, due to either having a low credit score or no credit score at all.
While traditional credit scores have worked for baby boomers and other generations, the data suggests they are not working as well for millennials who often have reduced visibility when it comes to tracking their credit based responsibilities, like paying for their cell phone service. This translates into not having a credit history or if they do have one it falls short, creating a situation where they get denied credit.
“Without a complete picture of millennial’s credit, many financial services companies are turning away good consumers, and the bad news for financial institutions is that only ten percent of millennials will re-apply to the same lender once they have been declined”, – said Patrick Reemts, vice president of credit risk solutions at ID Analytics.
Millennials are trying
While millennials may be having a hard time getting a credit card of their own it is not because they aren’t trying – they actually are. And they are applying for them at higher rates than their older counterparts-generation X or baby boomers (35 percent vs. 29 percent vs. 28 percent).
The study also discovered that millennials account for more of the total credit card applications filled out (35%) verses marketplace loans (28%). What this data suggests is that millennials are more interested in acquiring conventional streams of credit.
Low credit activation rates
There is no doubt that the younger set is applying for credit, but when you look at the data they have lower activation rates than baby boomers. Millennials are now the biggest generation of U.S. consumers, but when it comes to credit scores less than half of millennials have one, making it hard to get approved for credit cards and other streams of credit.
With a third not being able to generate a credit score, of those who can be scored two thirds who are under 30 years old, have either credit scores that are subprime.