America’s population is in the midst of a major generational shift as Baby Boomers look toward retirement and a younger generation re-shapes the workforce. A national survey released today by loanDepot LLC, America’s lender, suggests Americans may be facing a markedly changed financial landscape in the next decade as Millennials take a different approach to managing credit from the older generation.
The loanDepot study reveals a great divide between Millennial and Baby Boomer views about credit and their approach to managing it, with Millennials generally placing a lower value and priority on their credit score than Boomers:
Nearly three-fourths (73%) of Boomers believe maintaining a good credit score is very important compared to 59 percent of Millennials. Just under half of Millennials (48%) are aware of their credit score, compared to 60 percent of Boomers. Over one third (37%) of Millennials are confident in their ability to manage credit and say they do a great job at it compared with 53 percent of Boomers. Conversely, nearly a third of Millennials (27%) admit they could do better job or haven’t done a good job managing their credit. Only 15 percent of Boomers say they could do a better job or haven’t done a good job at managing credit. One segment of Millennials that does place a very high value on having a good credit score is Millennial homeowners. Sixty-three percent of Millennial home owners value having a good credit score, and 38 percent of Millennials who own a home consider themselves great with managing credit.
“Millennials have faced a far more challenging financial environment compared to that of previous generations, marked by record student loan debt, lower income levels and a tough job market,” said Anthony Hsieh, CEO of loanDepot. “While it’ll still be important for this generation to learn to manage credit successfully, there is no denying that as Millennials take the lead in driving the economy, having access to new and emerging technology-enabled financial solutions will be critical for lenders in serving this evolving population.”
MILLENNIALS BORROW, SPEND DIFFERENTLY
In addition to different mentalities towards credit scores, loanDepot’s survey found differences in Millennial and Baby Boomer approaches to borrowing and spending. Nearly a quarter of Millennials (23%) would consolidate their credit card debt so that they could spend more, while only 12 percent of Boomers would do the same. Additionally, nearly twice as many Millennials (20%) are likely to take out a personal loan in the future compared to only 11 percent of Boomers.
When it comes to how they’d use the funds from a personal loan, both generations pointed to home improvement and debt consolidation among the top three uses. However, 29 percent of Millennials would use the money to pay for a wedding or a vacation, compared with only 13 percent of Boomers.
DIVIDED APPROACHES TO CREDIT MANAGEMENT
Delayed entry into the workforce has set many Millennials back when it comes to managing their credit. But the good news is that they’ve reached out slightly more for assistance on their finances than Boomers. In fact, nearly two-thirds (60%) of Millennials said they’ve sought out some type of help with their finances in the past compared to 52 percent of Boomers.
Boomers and Millennials have also turned to different resources to help them manage credit. Almost one in five Boomers (18%) have used traditional sources like financial advisors, while Millennials have turned to parents and friends (35%), followed by online resources such as blogs and social media sites (20%) compared to Boomers (9%).
Based on the survey results, Millennials are slightly more open to considering nonbank online lenders than Boomers. While there is low awareness of these options in both segments (28 percent of Millennials and 34 percent of Boomers), Millennials who were aware of online lenders were more interested than their Boomer counterparts:
Eight of 10 (80%) Millennials who are familiar with nonbank lenders want the convenience of being able to shop for financial services online, compared with 62 percent of Boomers; and Eighty percent of these Millennials would go with whatever lender offers the best interest rate versus 69 percent of Boomers.
“As Millennials move further into adulthood, we can expect to see a higher priority placed on credit management to achieve life goals such as homeownership,” said Hsieh. “As this occurs, we’ll see a greater volume of online financial services emerging and better borrowing options for first-time home buyers by tech-enabled marketplace lenders like loanDepot who value this important and emerging generation and understand their needs, styles and preferences.”
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Tags: Financial Planning, Payroll, Staffing, Technology
