While Millennial homebuyers have been very vocal about their struggles in homeownership, it looks like this generation is doing better strides compared to an older generation when it comes to debts and credit scores.
A new State of Credit report was released by Experian just recently. While the Baby Boomer and Millennial Generations are taking positive strides when dealing with debts, Generation X seemed to lag behind.
Based on this report, America enjoys a positive and healthy overall credit. In the span of 12 months ending in June 2017, America’s average credit score rose from 673 to 675.
Consumer spending is also up as the Federal Reserve mentioned that credit card debt had set a new record in November 2017. Also, consumer confidence has improved drastically. However, this can take a sharp turn if the economy and employment head south and may cause serious dilemmas.
Here’s how each generation is managing their debts, their respective averages credit scores and their general creditworthiness:
Age range: 70 years old and above
Average credit score: 729
Average number of credit cards: 2.98
Average credit card balance: $4,613
Incidence of late payments: 0.12
Average (non-mortgage) debt: $15,161
Average mortgage debt: $157,000
Age range: 50 to 70 years old
Average credit score: 703
Average number of credit cards: 3.58
Average credit card balance: $7,550
Incidence of late payments: 0.30
Average (non-mortgage) debt: $27,513
Average mortgage debt: $189,000
Age range: 35 to 49 years old
Average credit score: 658
Average number of credit cards: 3.22
Average credit card balance: $7,750
Incidence of late payments: 0.54
Average (non-mortgage) debt: $30,334
Average mortgage debt: $232,000
Y Generation (Millennials)
Age: 21 to 34 years old
Average credit score: 638
Average number of credit cards: 2.52
Average credit card balance: $4,315
Incidence of late payments: 0.55
Average (non-mortgage) debt: $22,784
Average mortgage debt: $198,000
Age: 18 to 20 years old
Average credit score: 634
Average number of credit cards: 1.44
Average credit card balance: $2,047
Incidence of late payments: 0.23
Average (non-mortgage) debt: $6,963
Average mortgage debt: $160,000
Debts, Credit Score, and Mortgage
Your credit score and debts may affect which kind of mortgage you may qualify for. Lenders take a look at a homebuyer’s credit score and his or her debts dealings and determine a person’s creditworthiness. While this is not all that a lender considers, these two things are essential in the underwriting process.
Many Americans believe that a FICO score of 600 is good enough, however, this isn’t always the case. This score may be considered nonprime and lenders may have to offer home financing options that may not be as attractive.
If you want to to be eligible for prime mortgages, have a score of 680 or higher.
If you have a score below 600, is this going to be the last nail in the coffin? Are you stuck with a nonprime home finance?
The answer is no.
You may have to put some elbow grease into it and roll up your sleeves. but building a good credit isn’t far away when your score sits at 600.
IF you’re thinking about getting a good home loan in the future, you may have to have diligence in meeting your financial obligation. Make sure you start as soon as you can. The more you delay making the necessary repair on your credit, the more it’s going to hurt you.
Over the span of 12 months until June, we’ve seen impressive leaps on the average credit score among Americans. If such trend continues, more and more people will be able to qualify for home financing with lower interest rates and more favorable terms.
To cultivate good financial wellbeing and creditworthiness, practice good credit habits. When you have a conscious effort in doing it right every time, you’ll less prone to errors. While build your credit may take some time, it will be worth the time and effort when you’ll be approved for a better and more favorable mortgage.