Which Generation Has the Worst Credit?

Katie McBeth

Did you know that generational names — such as Baby Boomers, Millennials, and Generation X — were made up by marketers? The sole purpose of putting a name to a group of people born in a certain generation is just to make the life of a marketer easier: target “millennials,” instead of targeting “those born between 1985 and 2000.”

However, even though these names are simply a way of defining a group of people based on age, they have a major impact on how we evaluate our lives. Baby Boomers (1946 – 1964) are pursuers of the “American Dream,” and are very proud to claim their influence on the economic and political world. Generation X (1965 – 1980) is often seen as resentful of their parents, rebellious, and responsible for the biggest technological boom of the century (aka the 1990s). Millennials (1981-1995) are aloof, technical, and strong communicators, and although they are often seen as lazy, they are proud to prove what exceptionally hard workers they are.

Much of these generalizations of generations also bleed into the financial world. Baby Boomers are entering “retirement age,” Generation Xers are getting comfortable in their careers and raising teenagers, and Millennials are just now starting to enter the job market and figure out the financial side of adulthood.

How do each of them fair in terms of financial responsibility? Additionally, although many people within those generational brackets live vastly different lives, is it possible to determine the credit scores and financial health of each generation? Which generation stands out as the most financially frugal, the most financially strapped, and the most in debt? Let’s dive into the finances of each generation, and possibly determine what the future hold for the next.

Credit Scores Across Generations

Although it is impossible to fit all those in a generation within a certain credit score bracket — excellent, good, fair, or bad — it is possible to have an idea of the average credit score of each generation. For example, Baby Boomers have had more experience building up their credit history, but also had more opportunities to mess it up. Generation X has survived through the financial crash of 2008, and might be struggling to make up for it. Millennials are mostly suffering with student debt and little-to-no credit history.

In an Experian survey from 2016, the credit bureau found that averages across generations were pretty in line with the general expectations of each generation. Baby Boomers had an average VantageScore of about 700, which is above the national average of 673. Much of this was due to their experience in building credit and debt over 30 or more years.

Generation X was given an average score of 655, which is below the national average, but still in the “fair” range. The survey estimates this lower score is due to the amount of debt that Generation X is struggling with; both from the financial crash of 2008, higher interest on mortgages, and higher student loan payments.

Millennials (referred to as Generation Y in the study) have the lowest credit score of all, at an average of 634. Millennials are still building up their credit and have very little history with the banks. They also have a lot of debt with car, housing, and other loans, plus exceptionally high student loans. In a another study by TransUnion, it was discovered that almost 43 percent of Millennials have a credit score below 600 points, or what is known as subprime credit. Researchers expect this is due to a high utilization ratio on many of the loans this generation has accumulated over the past five years or more. Hopefully as their loans and history with the banks matures, their numbers could go up.

Debt By Generation: Who is Struggling the Most?

As many of those well-versed in the world of credit scores may know, debt has a lot to do with a healthy credit score. To build credit, you must first accrue debt. Balancing your debt payments, your credit utilization ratio, and your loans can be tricky, but it’s the formula that creates the credit score. So when considering the credit scores of each generation, you must also consider the existing debt of each and how that affects their scores.

Baby Boomers (1946 – 1964)

Baby Boomers certainly have the most history with the banks, but are beginning to retire. Since it is difficult to pay off debts when on a fixed income, it would be best for Baby Boomers to not have much debt at all. Is that the case? According to the 2016 Experian survey, Baby Boomers have some of the highest amounts of debt across the generations. Here’s what they found:

  • Average Credit Card Debt: $6,889
  • Average Retail Card Debt: $1,166
  • Average Overall Debt: $42,628

Despite this, another survey by ValuePenguin found that the majority of those over 50 years old still have high credit scores (over 780). As Baby Boomers continue to approach retirement, their high debt could pose a major risk to their scores if they default and are unable to make payments.

Generation X (1965 – 1980)

As for Generation X, the Experian survey found a very similar scenario in terms of the amount of debt they currently have. However, Generation Xers are not as close to that “retirement” threshold, and thus have more time to make payments and potentially prevent themselves from suffering under debt while on a fixed retirement income. Here is what they found in that survey:

  • Average Credit Card Debt: $6,866
  • Average Retail Card Debt: $1,347
  • Average Overall Debt: $42,412

Yet Generation X is still suffering from fair to bad credit scores. Researchers with ValuePenguin expect that credit scores should improve over time with each age group. Since the financial crash of 2008 happened almost ten years ago, many of those who filed for bankruptcy during that time might just now be enjoying the liberty of not having it show up on their credit report. Others might just be on the threshold of seeing that disappear. Either way, Generation Xers should focus on paying off their loans so they don’t find themselves in a tight spot, and they will be on the right track to having a happy retirement and a high credit score.

Millennials (1981 – 1995)

Millennials are certainly struggling the most with their debt, even though it is not the highest amount compared to other generations. However, with high student loans and many of them becoming first time homeowners, their credit scores are lower than average and their debts are fairly high considering their age and short credit history. Experian breaks down their biggest debt hurdles:

  • Average Credit Card Debt: $3,542
  • Average Retail Card Debt: $942
  • Average Overall Debt: $32,698

With all this high debt at such a young age, it’s no wonder Millennials are struggling to make payments on time and keep their credit scores high. ValuePenguin, however, notes that this is a typical progression that can be seen across the generations. As you age, your credit score and debts will increase. They state: “This trend coincides with the financial situation facing many individuals in their 30s. It is usually around this period in one’s life that major expenses and debt begin to rack up – weddings, first mortgages, etc. A study of American credit card habits revealed that this age group also faces some of the largest amounts of credit card debt.”

Future Expectations

Each generation provides their own lesson to learn from their mistakes. Baby Boomers teach us to plan early for retirement; Gen Xers teach us to be smart about saving; and Millennials teach us the importance of building credit early. Additionally, each generation holds thousands of individual stories that can teach us even more. But what can we predict will happen to the next generation by looking at this data?

Generation Z (1995 – 2015) is the next big generation to inherit our economy and thus learn from our mistakes. Many of them are still in high school, but some have already entered the college world and are beginning to build credit, and thus accrue debt. In fact, was able to collect data on this generation during their 2016 study. Overall debt for Generation Z was $14,446, and the average credit score was just below the Millennial score at 631. Considering their early foray into the financial world, this isn’t a bad start.

Forbes Magazine dove into this topic recently and found through their research that many Gen Zers are optimistic for their monetary future. By watching both their parents and grandparents struggle through the recession, they have had the ability to really learn from our mistakes. Plus, if they have questions, they have experienced professionals to help them understand the financial world: aka their parents.

Although their parents might not be confident enough to answer some of the harder questions, Gen Z has already begun to understand the importance of saving up. The average age for Gen Zers to start researching financial savings is 13 years old, according to a Lincoln Financial Group study, so we know the next generation is well on their way to greatness.

You don’t have to be defined by your generation’s mistakes or limitations, but you can learn from each generation’s mistakes and strengths. Don’t neglect your finances, and work on creating a healthy credit score. By being smart about your debt and your score, you can overcome any of the generalizations about your generation, and be a standout top performer in the world of personal finances.

Looking for more statistics and information on credit scores? Visit our credit score learning center. If there are errors on your credit report, lowering your score, visit our credit dispute letter template resource guide for more information.

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