Different World: 4 Reasons Millennials Build Credit Differently

Dec 22 • Finance • 116 Views • Comments Off on Different World: 4 Reasons Millennials Build Credit Differently

When it comes to finances, few numbers are as important as your credit score. You need a good credit score to get the best rates on loans and get approved for the best credit cards. Even if you’re not interested in those, your credit can play a factor in renting a home, your car insurance, and even job applications. As you can see, building credit is important, and it’s also one area where the younger generations act much differently than older generations. Here the four biggest ways in which younger generations, and especially Millennials, build their credit differently.

Different World: 4 Reasons Millennials Build Credit Differently

They Appreciate the Value of Credit Cards

Older generations have been a bit wary of credit cards. They see the potential drawbacks involved, such as spending money you don’t have to make purchases. Part of the reason for this is that credit cards only started offering cashback and reward points in the mid-80s, and it wasn’t until the 2000s that credit card rewards took a big leap forward.

For older generations, the idea of racking up credit card rewards to get a return on spending is a bit foreign, as is paying an annual fee for a credit card. For Millennials, it’s something they’re accustomed to. They don’t mind paying an annual fee for a credit card because they see the value they’re getting. Since credit cards are a great way to build credit, they end up being the most popular tools for Millennials to build credit.

But They Don’t Get Credit Cards Early in Life

Even though Millennials appreciate credit cards, legislation passed in 2009 made it so credit card issuers needed to be more discerning about who they sent offers to and who they approved. Before that, horror stories abounded about young adults getting credit cards, building huge balances that they couldn’t pay back and completely tanking their credit scores. Millennials will typically get credit cards a few years later and use them more responsibly because they understand the dangers.

They Focus on Flexibility over Long-Term Commitment

Although there are plenty of Millennials who dream of home ownership, that isn’t the be all end all like it used to be. Many Millennials prefer maintaining their flexibility instead of committing to anything for the long term. They’re more likely to stick to renting and wait on buying a home with a mortgage. They prefer short-term installment loans over longer loans that they’ll be paying off for years. In addition to flexibility, these services also offer availability and convenience. You only need to search something like “installment loans Utah” to get a handful of options to choose from.

This can lead to Millennials having less diversity in terms of their credit accounts and shorter average account histories, both of which can have a negative impact on credit scores.

They Have More Credit Knowledge

What really sets Millennials apart from older generations is their credit knowledge. There’s so much more information available regarding credit scores, and Millennials know how to look up anything they’d ever want to know. In a few minutes of searching online, they can see what factors have the biggest impact on their credit scores. This knowledge enables them to build their scores more efficiently than older generations did.

Millennials also take advantage of technology that lets them monitor their credit scores. There are plenty of free services, including sites and apps that show you your current credit score. Since Millennials are so comfortable with technology, they make the most of these services and stay on top of their credit well.

Millennials and other younger generations certainly go about building their credit differently than older Americans did, but most of the changes have been for the better. Their knowledge of credit scores and responsible credit card use gives them all the tools they need to build their credit well.

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