Millennials Attempt to Open Credit Card Accounts but Do Not Qualify
Building credit from scratch can be tricky, time consuming, and requires excellent purchasing / payment management skills. Many younger millennials are faced with the task of building credit but are often denied lines of credit when they attempt to apply.
A recent study by ID Analytics LLC, a consumer risk management research firm, found that about 63% of young millennials do not have a credit card. It’s not that there isn’t a demand for credit cards among millennials, approximately 35% of new card applications are made by millennials, it’s that they are frequently denied due to a lack of history and/or low scores.
Here are a few more of their ID’s research findings:
- Two-thirds of consumers under 30 have poor to good credit scores.
- Less than half of millennials have a credit score that is strong enough to qualify them for any kind of credit account.
- 6 out of 10 millennials are denied and not seen applying again for at least 12 months.
- Millennials are the largest generation of US consumer but have lower credit activation rates than baby boomers.
According to this research the biggest obstacle for millennials is a lack of credit history and/or poor credit scores.
If you have been denied credit recently it is important not to become frustrated with the catch-22 of the credit reporting industry. If you are being denied credit, stop applying randomly. By using a strategy that works you can build a nice credit profile.
First find a good secured credit card, they are great for establishing credit history. They will require a deposit which is used as collateral for the credit card. By making timely payments to your creditor and maintaining low balance to limit ratios you will build better credit scores. These cards usually charge a higher interest rate, annual fees, or some even charge high monthly fees due to the greater risk of the applicant.
There are many credit sites such as credit.com, nerd wallet, etc. that offer cards based on your credit level. You can view the terms, reviews, and ratings and actually apply from there. Once you are approved use the secured credit card responsibly for 6 months. Then you can ask to become an authorized user on an older friend or relatives credit card account (not an Amex) with great credit history and responsible payment habits. After having the two accounts on credit for about 8 months you can pull your credit scores at MyFICO.com (this is called a soft inquiry and will not impact scores) and based on your credit card FICO scores you can then apply to a regular CC and build from there.
If you see yourself eventually financing a new car or buying a home, you need to establish a strong line of credit history now, otherwise you will not qualify (or will pay higher pricing) when the time comes that you need a loan. If you are working to build credit history and scores, be sure to monitor your profiles on a semi-annual basis, if you have any questions or notice incorrect information on your reports please reach out to one of our credit experts for a free consultation.