Experian put together this infographic looking at credit and debt as it relates to each of the last four generations. While age isn’t one of the factors used in determining your credit score, many of the other factors that are included improve with time. The four generations included were:
They didn’t include anyone younger than Gen Y, presumably because they won’t have credit scores, it does include a large enough cross-section of America. Below the infographic, I’ve included some factoids extracted from the infographic. Click on the image below to see a larger version.
Experian found that Generation X had the second lowest credit scores but the highest debt load, at $111,121. Second place were the Baby Boomers with $101,951 in debt; both were significantly higher than the average of $78,030. Not surprisingly, Generation Y, people with the least amount of time to accrue debt, were the lowest at $34,765.
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Read more: http://www.moolanomy.com/181/7-steps-debt-reduction-illustrated/#ixzz2TlABZaqX
One of the most important factors in calculating your credit score is your history. A long history of good behavior significantly helps your credit score. If you had some difficulty early on, the years will smooth out those bumps in the road and your score will naturally go up, as long as you pay on time. Predictably, Generation Y had the lowest scores, in part because they had the least amount of time.
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Compared with the surveyed population, Generation X had 14% over the average in student loans while Generation Y had 420% over the average. We can point to some likely culprits, the first of which is the rising price of higher education. As the price to attend college soars, students are forced to take out more student loans to help pay for it. A second likely reason for this disparity is that Generation X and Generation Y have had the least amount of time to pay off their accrued student loan debt.
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As mentioned earlier, Gen Y has 420% over the average in student loans but they also have 136% over average on auto loans as well. Gen Y is improving its credit score by making student and auto loan payments on time, which in turn will help their prospects improve when they go to buy a house or make another large purchase.
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If you were to treat the four columns like a real person, it tells an intruiging story. As a Gen Y, you would see yourself with a little bit of debt, mostly in student loans and auto loans. Eventually, over time, you’d improve your credit score with good behavior and then buy your first house. As the years pass, you continue to pay down your debt until you only have your mortgage(s). While everyone won’t follow that same narrative, it’s probably a pretty good framework.
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While you shouldn’t use this as a predictor of your credit score, it’s always interesting to see these types of statistics. As a credit bureau, Experian has access to a wealth of credit information and I find it interesting to see it aggregated this way.
See original infographic (PDF).
This is a very fascinating and sobering article. It is a tough time to be young. Our youth are buried under mountains of debt. Something’s going to give.
The positive “spin” in that info graphic is nauseating. 40% of Gen Y debt isn’t in mortgages. So the average is $14,000 in worthless, unsecure debt!? They’re “building credit” alright. If you’re entering retirement with debt, you are not on track for financial freedom.
I guess I am on the cusp of Baby Boomers and the Greatest generation. I turned 65 last year. I have a very high FICO score (800+)! My only debt is a small mortgage. I have achieved the ultimate American Dream, financial freedom.
Generation Y is going to have a tough time with student loans.
Currently, the total debt from student loans is about $1 Trillion, 14x more than 15 years ago. Total credit card debt is right under $800 Billion. Some experts actually believe that student loans are a ticking time bomb that’s waiting to explode, and could have the same repercussions as the mortgage crisis. Too bad you can’t include it in bankruptcy huh?