Credit Scores, Debt Levels Differ Between Generations

Credit Scores, Debt Levels Differ Between Generations

Ever wonder how you compare to other members of your generation?

We're not talking height, or the car you drive, or which version of 90210 is the "real" version. We're talking about something a little more up our alley: debt and credit score.

It probably isn't much of a surprise that 20-somethings tend to have worse credit scores than 50-somethings, as reported by credit bureau Experian, but why are 30-somethings the group with the highest amounts of debt?

The Experian study divided people into four generations: Gen Y, Gen X, Baby Boomers and the Greatest Generation to compare both average credit scores and average amount of debt carried. Here's what the researchers found:

Generation Avg Debt Avg Credit Score
Gen Y $34,765 672
Gen X $111,121 718
Baby Boomers $101,951 782
Greatest Generation $38,043 829

So, we ask: What's behind the numbers?

Gen Y (19-29)

Despite all the bad press surrounding Generation Y (like how they are bringing their parents to job interviews or being totally inappropriate in the workplace), they actually have the least debt out of all the age groups! But also the lowest average credit score.

Both factors directly relate to time. You need time to build a credit score, and debt typically accrues over time, too. Surprisingly, the debt burden they do carry isn't student loans so much as mortgages (student loans come in second for this age group, at 15.1%, as compared to 59.9%). It's also important to consider that their entrance to adulthood was overshadowed by the recession, which, in the long run, might mean a more conservative spending outlook than Gen X—which is just what happened in this tale of two daughters coming of age on either side of the recession. The study does point out, however, that while this generation has the lowest debt in the study, $35,000 is still considerable. (Note: The debt in the study is a mix of both good and bad debt.)

Gen X (30-46)

Generation X holds the dubious honor of the highest average debt burden ($111,121) per person. In terms of life stages, it makes sense because many people in this age bracket are buying their first homes and cars, and having children, even while they continue to pay off considerable student loans. Since this life stage is all about beginnings, chances are they're incurring more debt than they're paying off. We also have a feeling this group was most affected by underwater mortgages, since they're at about the right age to have taken on their first mortgages during the real estate boom of the past decade.

The Baby Boomers (47-65)

Based on the numbers, a large percentage of Boomers have most likely bought their homes but not finished paying the mortgages. And, at the same time, they're confronting saving for college for their growing children, so they have a pretty significant debt burden. All the same, they're old enough that they have a long credit history, multiple credit cards that they actually use and are practiced in the art of paying bills.They're equal to or better than average in every category of debt except for second mortgages, which make enough of an impact that they hold the second-highest average amount of debt, at $101,951.

The Greatest Generation (66+)

The Greatest Generation has the best average credit score and the least debt—and it makes sense that the people who have been managing their finances the longest are in the best shape. They've had years to establish impressive credit scores (their average is 829, over 10% higher than the national average!) and most have paid off their mortgages, student loans and car loans. The study reveals that the little debt they do have (only about $4,000 more than Gen Y) is due to first and second mortgages. While the Experian study didn't address savings, they're also one of the final groups to receive pensions—so we do hope they also have money saved for impending retirement (Surprise! Here's why retirement is actually harder for women).

It's a Study, Not a Prediction

No matter what your generation, a study does not a self-fulfilling prophecy make. Your credit score and your debt (as well as your emergency fund and retirement fund) are wholly dependent on you. Well ... you with our help.

We recommend these nine ways to raise your credit score immediately. And to jettison your debt, we have Get Out of Debt Bootcamp. If your situation is particularly confusing, we also offer courses in topics such as investing, and have in-house financial planners who can give you personalized, actionable advice.

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