ID Analytics, a consumer risk management company, announced Wednesday (Oct. 26) new research that revealed over six out of 10 millennials declined for credit are not seen applying again for at least 12 months.
In a press release, the company said the study found that millennials often apply for credit but are declined due either to their lack of credit history or to low credit scores, despite often having an ability to repay, according to data from the ID Analytics ID Network, one of the nation’s largest networks of cross-industry consumer behavioral data.
A frequently referenced Bankrate.com study reported that 63 percent of millennials do not have a credit card. While many millennials may not own credit cards, it is not for a lack of applying for credit. New data from ID Analytics found that millennials are applying for credit cards at higher rates than Generation X or baby boomers (35 percent vs. 29 percent vs. 28 percent, respectively). ID Analytics also found that millennials actually make up a larger percentage of total credit card applicants (35 percent) than marketplace loan applicants (28 percent), indicating that this group is interested in traditional forms of credit.
While they may be applying for credit, millennials have lower credit activation rates than baby boomers. Fewer than half of millennials, the largest generation of U.S. consumers, have credit scores that will qualify them for credit accounts with most mainstream lenders. One-third of millennials cannot be scored by a credit bureau due to their lack of credit history, and of the “scoreable” group, two-thirds of consumers under 30 have subprime or non-prime credit scores. ID Analytics’ research shows that the most common consequence of declining a millennial applicant is that the consumer walks away for at least a year — both from the enterprise and from credit/service seeking altogether.
“Traditional credit scores may have served previous generations well, but their lack of visibility into critical modern credit responsibilities, like the payment of cell phone bills, leave many millennials with incomplete or nonexistent histories at the major credit bureaus,” said Patrick Reemts, vice president of credit risk solutions at ID Analytics, in the press release. “Without a complete picture of millennials’ credit, many financial services companies are turning away good consumers, and the bad news for financial institutions is that only 10 percent of millennials will reapply to the same lender once they have been declined.”