On the 300 to 850 credit score scale, TransUnion reports that 43 percent of millennials (people between the ages of 18 and 36) have credit scores that fall below 600. Lenders typically consider credit scores below 600 as poor credit. TransUnion used the Vantage Score model, which is different from the FICO model. According to TransUnion, which is one of the three credit reporting agencies in the United States, the statistics come from an analysis of 10 million consumers who fall under the millennial generation category.
The Vantage score is a credit scoring model created by two of the three credit reporting agencies, TransUnion and Equifax. Some lenders use Vantage scores to check a potential borrower’s credit histories while other lenders still rely on FICO scores. A VantageScore falls under different categories of creditworthiness than FICO scores. A VantageScore can range from subprime to super prime. TransUnion’s report indicates that many millennials fall under the subprime category.
VantageScores tend to improve as borrowers age, states TransUnion. Older generations, such as the silent generation, typically have credit scores that fall under the prime or super-prime category. Very seldom do borrowers that fall in the silent generation category have credit scores below 600. According to TransUnion, only 6 percent of people considered the silent generation have credit scores below 600. Since many people who fall under the silent generation category use less of their available credit than millennials, their scores are typically higher.
TransUnion states that one recipe for building and maintaining high credit scores is to utilize less credit. Long credit histories, on-time payments and a mixture of installment and revolving accounts are also key to higher credit scores. Many millennials are stuck at the lower end of credit scores because of their lack of credit histories and credit utilization. TransUnion recommends that millennials who rent should ask their landlords to report their on-time payments to one of the three credit bureaus. VantageScores use rental histories as part of its scoring model while other scores do not consider on-time rent payments.
Both FICO scores and VantageScores use information from a borrower’s credit report to calculate scores, and shorter credit histories tend to result in lower credit scores. Millennial borrowers can build their credit scores by qualifying for a credit card if possible, and if they do not qualify, they should open a secure credit card account with a traditional bank or lender.