Grandma wore bell bottoms, mom still has a pair of ‘80s leg-warmers hidden in her closet, and the only universal thing about the grandkids’ style is their accessory of choice – a smartphone. Varying fashion sense isn’t the only thing that defines the generation gap, though. The differences between generations can also be seen in how different age groups handle credit and debt.
A recent credit trends study by Experian highlighted the credit and debt differences among the Greatest Generation (people 66 and older), Baby Boomers (ages 47 to 65), Generation X (ages 30 to 46) and Generation Y (ages 19 to 29). Turns out, how you use credit may actually be tied to your generation.
Among the study findings:
- Members of the Greatest Generation have the highest average score, at 820.
- Generation Y has the lowest average credit score – 672.
- Generation X has the most debt, with an average of $111,121.
- Generation Y has the lowest amount of debt, at $34,765.
- All four generations list a first mortgage as the largest percentage portion of their debt.
- Second mortgages are the second largest percentage of debt for boomers, the Greatest and X generations, while (not surprisingly) student loans are in second place for Generation Y.
Regardless of the differences in how the generations use credit and manage debt, the need to establish and maintain good credit is universal. The basic keys to good credit remain the same, no matter what your age:
- Pay your bills on time. It’s the single most important contributor to good credit.
- Establish credit as early as possible.
- Use a variety of types of accounts.
- Keep an eye on your ratio of credit used to credit available. Ideally, it’s better to have more credit available than you actually use.
- Review your full credit report on a regular basis, and especially before making any major purchases.
- Pay off credit card balances quickly, and always pay more than the minimum amount due each month.
Maxine Sweet, Experian’s vice president of consumer education, sums up the study’s take-away lesson: “For all consumers, establishing and maintaining a positive credit history is an important step in achieving financial goals. At any age, paying bills on time is the single most important contributor to good credit.”