58% of Millennials Denied Credit
Bankrate found that a combined 35% of baby boomers, Gen X, and the Silent Generation have also been denied at least one financial product - a loan, checking account, credit card, or revolving credit account - because of bad credit scores.
The report surveyed 2,498 people and found that the top three financial products that millennials rejected for were: credit cards (36%), auto loans (18%), and housing (13% for mortgages and 13% for rent).
The report found that 36% of respondents making less than $40,000 were denied a credit card compared to 22% of respondents who had an income of $80,000 or more.
Other statistics highlight differences between the genders and credit scores: 44% of men said that their credit scores are important to them, compared to 53% of women.
Bankrate credit card analyst Ted Rossman said in a statement: “I hear from so many Gen Xers, ‘Oh, I got my first credit card when I was in college. They set up a table on the quad, they gave me a lame giveaway like a t-shirt or something and I got this card and I ran up a ton of debt.’”
Ever since the Great Recession, it has become much harder for millennials to get a first credit card. According to the Federal Reserve Bank of New York, consumer debt increased to $12.68 trillion just before the 2008 housing crisis. Then in 2009 the Credit Card Act was passed, and it took effect in 2010. It aimed to minimize the factors that contributed to ever-growing consumer debt, and one of those factors was abusive credit card practices from companies that issue credit cards.
In his report, Ted Rossman said difficulties obtaining credit cards has been one of the unintended consequences of the Credit Card Act. “One of the key provisions of this law was to push credit card marketers off college campuses and to make it difficult to get a credit card before your 21st birthday,” he said. “What’s happened in practice is that even beyond 21, people are having trouble qualifying for their first card because it’s like getting your first job. Everybody wants you to have experience - but if you don’t have experience, then how do you get it?”
According to the Federal Reserve’s quarterly survey of senior loan officers, banks have tightened the rules on credit card loans this year. The Credit Card Act has also allowed credit card companies to raise interest rates, which has contributed to rising consumer debt.
“The easiest way to raise a rate on an existing balance is when you tie it to an underlying index like the prime rate,” Rossman said. “So what happened post-2010 is that almost all major issuers tied their rates in with the prime rate.”
Consumers should keep checking their credit scores if they want to stay on top of their finances. According to the report, only 43% of millennials know their own credit scores, compared to 54% of older generations. Knowing the score can help you figure out where you stand and where to go from there if you want to save more money.
Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.
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