A new study from Open Lending and TransUnion shows that Millennials and Gen Z are steadily raising their credit scores.
This goes against what people have thought for a long time about how young people handle their money.
Even though these generations may not feel financially safe because of the unstable economy, data shows that they are making big steps toward building stronger credit profiles.
The ‘Vibecession’ and Credit Score Growth
“Vibecession” is the term for the difference between how people think the economy is doing and what the numbers say. Even though they are worried about money, Millennials and Gen Z are showing that they can improve their credit.
The study found that only 22% of people from older generations moved up credit tiers within two years, while 30% of people in these generations did.
One reason for this change is that younger people have more money to spend. Joseph Camberato, CEO of National Business Capital, says that people can quickly raise their credit scores if they responsibly handle their first credit card or auto loan.
Older groups, on the other hand, tend to have more debt, which can take longer to pay off but is good for their credit reports.
How Millennials and Gen Z Compare to Older Generations
In 2024, the average credit score in the U.S. was 715, which is what the three main credit companies call “good.” But the average scores for Millennials and Gen Z are a little lower—690 and 680, respectively.
These numbers are lower than the national average, but they are still good enough for a lot of money-making chances. For instance, a standard home loan usually needs a credit score of at least 620.
Credit scores are affected by many important things, such as payment history, credit utilization, length of credit history, credit searches, and types of credit.
Younger people usually have shorter credit histories, but if they consistently pay their bills on time and use credit wisely, their scores can rise fast.
Why Lenders Are Taking Notice
Kevin Filan, senior vice president at Open Lending, says that Millennials and Gen Z are a “strategic consumer segment” that has a lot of room to improve their credit.
He thinks that banks that use smart data analysis to serve these new prime borrowers will be able to build long-term customer trust and make money by lending to them.
Even though their credit scores are getting better, some lenders are still hesitant to give loans to younger people, especially those with weak credit histories.
When their credit scores get better, though, lenders might be more willing to offer these people better loan options.
The Path to Better Credit
Experts think that Millennials and Gen Z are on the right track with their money, but they need to keep it up.
Kendall Meade, a financial manager at SoFi, says that people should only charge what they can afford and pay off their credit cards in full every month.
Keeping up with these habits can help you get better financial deals and keep your credit score high.
As Millennials and Gen Z continue to get ahead financially, their better credit scores could change how loans are given out and how people handle their money in the years to come.