Why Are Millennials Finding It Hard To Build Credit?

By Larry Alton

Credit is essential if you want to build a financial future for yourself. That one score, ranging between 300 and 850, can determine your probability of landing a mortgage, getting a loan, being approved to rent an apartment, or even getting hired for a job. Employers won’t be able to see everything on your credit report—the way lenders can—but a bad credit score can get in the way of you finding a job.

As I’ve written before, millennials are struggling to get jobs in this market. There are a variety of reasons for this, including overconfidence and high competition, but declining credit scores among millennials, compared to older generations of job seekers, certainly aren’t helping matters. For the professionally-minded millennial, hoping to get a solid gig and start building a life, credit is one of the most important legs of the journey—yet many millennials are finding it hard to build credit.

Millennials and Credit

According to a recent study by Experian, people aged 19 to 34 had an average credit score of 625, while Gen Xers had an average score of 650, and baby boomers had an average of 709. But it’s more than just averages at play here—according to a report by TransUnion, 43% of millennials have what’s known as a “subprime” credit score, or below 600, which limits their access to loans, mortgages, and other major financial opportunities. Compare that to Gen Xers, who are only at 33%, or baby boomers at 20%.

That dip could have a serious impact on millennials trying to enter the job market for the first time. How is this happening?


The first part of the problem may have something to do with millennials’ awareness of credit scores, including their importance and how they’re calculated. According to a survey by the National Endowment for Financial Education and George Washington University, only 8% of millennials had a “high” amount of financial knowledge, compared to 69% that believed themselves to have high financial knowledge. This indicates a serious gap between what millennials think they know and what they actually know.
For example, millennials may not know that they can get their credit score checked for free or repair their damaged credit score. Even worse, they may not understand what a credit score is or why it’s important. In a similar vein, millennials are underestimating what it takes to land a job in today’s market, or else are missing the mark on their resumes and applications.

Debt Thresholds

Low credit scores could also be attributed to using a higher percentage of their available credit limits. According to the Experian study, millennials use about 43% of their available credit limits, compared to only 34% as a national average. They are also more likely to have auto loans, with newly opened auto loans having an audience that’s 14% millennial (compared to just 1% Gen X). Of course, millennials are also struggling with higher levels of student debt than generations past as well, which is interfering with their ability to buy homes. Ironically, because this is also interfering with their ability to get jobs, it’s creating a self-sustaining cycle of financial limitation.

Credit Card Use

Ironically, part of the problem is also that millennials are afraid of credit cards. After witnessing the economic crisis of 2008 and the consequences of carrying too much unnecessary debt, millennials have deliberately stayed away from credit cards. According to Bankrate, 63% of millennials don’t have a single credit card open.

The problem here is that without at least one credit card, it’s difficult to start building credit. You don’t need to amass an enormous amount of debt—in fact, that could work against you—but you should be making occasional purchases and paying them off relatively quickly.


Age may also be a factor here. Most of these surveys polled members of each generation as they stand today—rather than how they all stood when they were the same age. For example, Generation X was polled at their current age range, rather than using historical data to see what their credit scores were like when they were 18 to 34.

Your credit score has a tendency to increase as you get older, for a number of reasons. First, because older people have a better chance of paying off their debts, their credit scores are automatically higher. Second, they’ve had more time to make and correct their financial mistakes, and are more likely to have paid down their existing debts.

What Millennials Can Do

If you’re a millennial job hunter and you’re reading this, you may not know what your credit score is. If that’s the case, your first task is to find out. You can do this for free, and most services will also give you a free report that shows you the most significant areas responsible for that score, which usually include:
Your payment history (including any missed payments you’ve had)
Your current number of accounts, and how much you owe on each one
The mix of your current credit
The length of your credit history
How much of your credit is new
If you have a low credit score, there are some quick things you can do to help correct it, including paying down your debts, no longer applying for any new credit, and avoiding any future missed payments. Unfortunately, beyond those tactics, improving your credit score becomes a kind of waiting game.