Member Exclusive

Research: For a generation just hitting the workforce, Gen Z has surprisingly good credit

  • Gen Z has higher average credit than Millennials and Gen X
  • But people born after 1996 will need more help in managing their finances.
close

Email a Friend

Research: For a generation just hitting the workforce, Gen Z has surprisingly good credit

Generation Z may be a young generation but their average FICO scores are higher than Gen X and Millennials. That’s according to a recent survey conducted by LendingPoint of almost 5 million near prime people. For the generation born after 1996, the average FICO score is 637, compared to 629 and 632 for Millennials and Gen X respectively.

This is particularly interesting when you consider that a big component of credit scoring is the length of credit history, which, by definition, Gen Z currently has very little of.

As Gen Z hits the workforce, it makes sense that their average income ($47,825) is lower than the average for all generations ($66,339). This cohort is sensitive to tapping credit and rising debt levels, too. So, from a generational point of view, Gen Z carries a significantly lower (9.9% compared to 17.2%) debt to income ratio.

While wary of amassing debt, Gen Z also thinks about credit as form of payment. This generation uses point of sale loans to finance larger purchases, and indeed, 25 percent of their personal loans go toward paying for large expenses. Gen Z is 3X more likely than a Millennial to apply for loans for a major purchase.

Source: LendingPoint, Tearsheet Research

Other generations use new credit more frequently to consolidate existing debt.

It may just be a matter of time before more Gen Z constituents turn to credit cards and other forms of consumer credit as they emerge into adulthood. The number of Gen Z people that carried a balance on a credit card increased 41 percent year over year, according to research from TransUnion.

When it comes to spending, Gen Z appears to take care in determining what’s worth spending on what’s not. In general, Gen Z is a more frugal and fiscally responsible group:

  • 72 percent say that cost is most important factor when making a purchase
  • 47 percent use their phones in-store to check prices and ask family or friends for advice
  • 66 percent plan to attend college in-state to save on tuition

While credit and spending data is encouraging, there are signs that Gen Z is already creating poor financial habits. Having watched Millennials and Gen Z before them struggle with personal finance, Gen Z knows it needs help with decisioning. Managing money remains the most daunting challenge for college students for the fourth year in a row, with 47 percent of students saying they do not feel prepared to manage their money, according to research from AIG and EVERFI.

But how this generation uses the advice it receives remains to be seen. There are emerging signs that Gen Z is skeptical of the way the credit markets work and less interested in paying back the money they borrow in full and on time.

  • Sixty percent of students already have taken or plan to take loans to cover their tuition bills, but only 65 percent of borrowers plan to pay off these loans on time and in full.
  • Only 49 percent of students plan to follow a budget, which is down from 76 percent in 2012.
  • Only 60 percent of students plan to pay their credit card bill on time, down from 85 percent in 2012.

1 comments on “Research: For a generation just hitting the workforce, Gen Z has surprisingly good credit”

  • OpinionMaker ,

    THC Oil for Sale

    […]always a big fan of linking to bloggers that I adore but don’t get a good deal of link enjoy from[…]

Outlier OpinionsMakers

Member Exclusive

Outlier Briefing: Best practices in digital onboarding with Ted Brown

  • The move to digital banking has focused on customer acquisition.
  • Today's guest explains why onboarding -- what happens after a new account opening -- is even more important.
Zachary Miller | October 01, 2020
Member Exclusive, Online Lenders

Goldman Sachs partners with Walmart to offer SMB loans to online sellers

  • Goldman Sachs has built its retail Marcus brand into a $100 billion bank.
  • It continues to sign partnerships with leading brands to provide financing to their customers.
Zoe Murphy | September 24, 2020
Member Exclusive, New banks

Tracking $1.2 trillion of invoices, Intuit’s plans for small business banking are bigger than QuickBooks Cash

  • QuickBooks Cash is Intuit's entry into small business banking.
  • But the accounts represent a much more strategic financial services vision for the software company.
Zoe Murphy | September 23, 2020
Member Exclusive

Data Snacks: New data shows the majority of SMBs didn’t even bother to apply for PPP assistance

  • SMBs have struggled to survive during the pandemic.
  • A new survey shows that in spite of all the fintech resources, many didn't even bother applying for relief.
Zoe Murphy | September 17, 2020
4 charts, Member Exclusive

4 charts on the impact COVID-19 has had on consumer fintech adoption

  • With branches closed, Americans needed the lifeline that fintech provided during the crisis.
  • The number of fintech apps and the frequency people use them have both increased.
Zoe Murphy | September 15, 2020
More Articles