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A recent survey from Experian shows that among small business owners, folks in the millennial generation have the lowest overall consumer credit scores out of all the demographics studied. The youngest generation also has the lowest level of education and the highest levels of credit utilization.
The study looked at small business owners to find out how entrepreneurs are using credit. For the study, Millennials were defined as those ages 18 to 34, Generation X were those ages 35 to 49, Baby Boomers means people ages 50 to 67, and the Greatest Generation is made up of folks ages 68 and up.
Credit utilization is high, scores are low
Credit utilization, or the amount of credit used relative to the line of credit available, was highest among Millennials, with an average utilization rate of 54%. Generation X was right behind them, with a rate of 51%. Baby Boomers and the Greatest Generation came in third and fourth, respectively, with utilization rates of 41% and 32% each. However, the actual average balances owed show that older folks actually have more debt. For example, the Greatest Generation carries an average debt load of $10,445 while Millennials owe an average of $6,263.
This is likely due to the fact that older people tend to have higher credit limits than their younger counterparts; therefore, they can rack up more debt and still have lower utilization rates.
Millennials also have the lowest average credit scores, perhaps because they have shorter credit histories and lower credit limits. The average Millennial small business owner had a business credit score of 32. (While consumer credit scores range from 300-850, business scores are on a 1-100 scale.) Average scores crept up with each generation: 33 for Generation X, 37 for Baby Boomers, and 41 for the Greatest Generation.
Education, experience, and income factor in
Younger business owners also had the least education of all the demographics studied. Fifteen percent of them never graduated from high school, and 16% didn’t finish a bachelor’s degree. Twelve percent of Generation X entrepreneurs didn’t complete high school, and about 19% of Baby Boomers didn’t graduate from college.
The most popular industries for Millennials to enter were business services, cleaning and maintenance, general contractors, and beauty shops.
Only slightly more than 27% of Millennial business owners were making between $50,000 and $74,999 a year, something that may reflect their lesser experience as well as lower education levels. The average older person (members of the Greatest Generation) had been in business for a little more than nine years, while the average Millennial had been in business for just over five years.