COSTA MESA, Calif., Nov. 20, 2013 /PRNewswire/ -- As the nation emerges from the recession, which groups of Americans are faring the best when it comes to credit and debt and who is faring the worst? Experian®, a leading global information services company, released key findings from its Experian's Fourth Annual State of Credit study today showing that Millennials are facing the biggest challenges when it comes to credit and how they are managing their debt. With the lowest number of bankcards (1.57) of all of the generations and a low total debt of $2,682 on those cards compared with other generations, one would assume that they are managing their debt wisely, but with high utilization1 as compared to their individual credit card limits, average debt2 of $23,332 and high incidences of late payments, it seems this generation is not entering this phase of life with positive credit behavior, which attributes to their low average credit score of 628.
The study provides an in-depth analysis of four generations — the Greatest Generation (ages 66-plus), Baby Boomers (ages 47 to 65), Generation X (ages 30 to 46) and Millennials (ages 19 to 29) — featuring their credit scores, the number of credit cards they have, how much they are spending on those cards and the occurrence of late payments. Additionally, credit scores were analyzed in Metropolitan Statistical Areas (MSAs) to provide the 10 highest and 10 lowest credit scores in each generation across the nation.
"While this study looked at all four generations, we found that Millennials are in need of the most guidance to improve and build their overall credit health," said Michele Raneri, vice president of analytics, Experian. "The younger generation are still building their credit, but with the right combination of experience, credit education and choosing credit offers wisely, the 20's can be used as a time to demonstrate creditworthiness and build a positive credit history."
The study shows that nationally, the average debt in the United States is $27,887, the average number of bankcards is 2.19, the average balance on those bankcards is $4,501, the average revolving utilization ratio is 30 percent, average incidence of late payments is 0.43 and the average VantageScore® is 681 based on a range from 300-850.
Snapshot of generational debt differences
Greatest Generation Baby Boomers Generation X Millennials Average debt $23,245 $29, 317 $30,039 $23,332 Average number of bankcards 1.90 2.66 2.13 1.57 Average balance of bankcards $3,044 $5,347 $5,343 $2,682 Revolving utilization ratio 16% 30% 37% 37% Late payments 0.14 0.33 0.61 0.58 VantageScore 735 700 653 628
Average balance of bankcards
Revolving utilization ratio
Insights for each generation:
- With an average credit score of 735, this generation not only has the best score, but also has the lowest average debt, low bankcard balances and lowest utilization, which means that with the few bankcards they have, they aren't relying on them heavily, are making payments on time and may be paying those bills in full each month.
- They have the lowest average debt amount of $16,768 in the city of Bowling Green, Ky., which is 39.9 percent less than the national average.
- When analyzing the best credit scores in MSAs throughout country, the top 10 scores range from 753 to 757 and all are attributed to this generation, with the Greatest Generation residents of Mankato, Minn., holding the top score (757) nationally. The lowest score for this generation belongs to the residents of Laredo, Texas, with a score of 692.
- With the most bankcards of all the generations (2.66), this generation relies heavily on those cards, racking up the highest balances of all the generations. Even with the high balances, this group has an average utilization percentage and low incidence of late payments. They are managing their debts well and have maintained a higher-than- average credit score of 700.
- Baby Boomers in New York City have the most credit cards with an average of 3.28, which is 49.8 percent higher than the national average.
- When looking at all of Baby Boomers' credit scores across the U.S., the Boomers in Mankato have the best average credit score of 743 and the Boomers in Greenwood, Miss., have the lowest average score of 641.
- This group has an average debt amount of $30,039 which is 7.7 percent higher than the national average and is the highest of all the generations. Not only is their debt high, but it seems they are using their cards much more and may not be paying those debts off or on time as they have the highest occurrence of late payments (0.60) that has ultimately resulted in their average credit score of 653, which is 28 points lower than the national average.
- Gen X residents in Fairbanks, Alaska have the highest average debt amount in the country, with an average of $36,150, and the highest utilization rate of 47 percent.
- The highest credit scores for Gen X are in Minneapolis, Minn., with an average of 690 and the lowest belongs to the residents of Greenwood at an average of 641.
- As mentioned earlier, this group has the lowest average credit scores, is over-utilizing its bankcards and is beginning to develop bad credit habits, such as paying bills late.
- The Millennials with the highest credit scores are in Charlottesville, Va., with an average score of 668, which even as their best credit score, is still 13 points lower than the national average. The lowest scores are in Greenwood at 558.
- In Eureka, Calif., Millennials have the lowest average debt of their generation with only $18,751.
To get a more in depth look all of the top 10 and bottom 10 rankings by each generation, please view the full list included in the infographic.
In summary, the State of Credit for Americans is very healthy overall, with room for improvement for the younger generations. While there are some areas that have commonalities—both positive and negative—across the generations, such as the consistent low credit scores in Greenwood, MS or the high credit scores in Minneapolis, the true common thread is that with positive credit behaviors, the needle can be moved in the right direction.
"While the credit scores and average debt numbers have meaning, what is really important is for everyone, no matter what age or where you live, to understand the value of having positive credit references. No one should use credit to live beyond their means," said Maxine Sweet, Experian vice president of public education. "Experian publishes studies like this one, along with financial education resources, to help everyone 'live credit smart' and make positive changes in how they manage credit."
Additional data and educational resources
- More details from the analysis — including an interactive map and an infographic are available at Experian's http://LiveCreditSmart.com.
- Join the #CreditChat hosted by @Experian_US on Twitter with financial experts and consumers every Wednesday at 3 p.m. Eastern time
- Join our special #StateofCredit tweetchat today at 4 p.m. Eastern time on the credit differences between generations. Follow @Experian_US to join in.
- Visit Experian's help site for answers to common questions, advice and education about consumer credit.
- Consumers are welcome to ask their credit questions on our Facebook page at https://Facebook.com/ExperianUS.
- Personal finance journalists and special guests will be contributing their tips and insights throughout the week on the various generations on the Experian news blog.
"The data speaks for itself, making the case that the need for financial education around responsibly managing credit is alive and well," said Gail Cunningham, vice president of membership and public relations at the National Foundation for Credit Counseling (NFCC), the nation's largest network of nonprofit credit counseling agencies. "The good news is that consumers have the opportunity to take advantage of the multiple resources Experian and the NFCC offer. We encourage anyone interested in improving their financial well-being to take action today."
The consumer analysis is based on a statistically relevant sampling of Experian's consumer credit database. Analyzed credit files did not contain personal identification information. Credit scores for the State of Credit report are based on the average VantageScore by designated market area from June 2013.
VantageScore Solutions, LLC (www.vantagescore.com) is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models, including the recently announced VantageScore 3.0 model which provides up to 25 percent predictive improvement over earlier models and has the ability to formulate a score for 30 – 35 million previously unscoreable consumers. Initially developed by America's three national credit reporting companies (CRCs) — Equifax, Experian and TransUnion — VantageScore Solutions' highly predictive models use an innovative, patented and patent-pending scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies.
Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2013, was US$4.7 billion. Experian employs approximately 17,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and Sao Paulo, Brazil.
For more information, visit http://www.experianplc.com
Experian and the Experian marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the property of their respective owners.
VantageScore® is a registered trademark of VantageScore Solutions, LLC.
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1Amount of credit available being used
2Average debt for this study includes all credit cards, auto loans and personal loans/student loans.