Generation X- ages 30 to 46- is thus far the generation that has the most amount of personal debt. A new study by Experian shows that this generation has an average of $111,121 per person. On top of that, they sport a credit score of only (718), while Baby Boomers average about $101,951 worth of debt and rock a credit score (782). Meanwhile, Generation Y, ages 19 to 29 are so far averaging $34,765 in personal debt, but with the worst credit rating (672). This disparity has some credit professionals scratching their heads.
So what explains this tumultuous trend? The study suggests that the three age groups manage their money in drastically different ways. Although the credit score gaps are drastic between the oldest the Greatest Generation (829), and the youngest Generation Y (672), the amount of personal debt between them are not very far off. The study found that every generation’s biggest debt contributor is their first mortgage. But Generation X’s mortgages are 5% higher other generations. Second mortgages make up 5.9% and car loans are 5.8% of debt. Baby boomers fair the same or a little under national averages, except in the category of second mortgages where they are 23% higher than the national average.
Generation Y’s main challenge is their low credit score, which can be attributed to maxed out credit cards and late payments. This generation has the highest rate of late payments and debt that is sent to collections. Together these elements slowly chip away at credit scores. But Generation Y does have time to change this trend. Short credit histories can be repaired faster, so by the time they want to make large purchases they will be able to if they are committed to credit repair. The study did not include how high unemployment rates or challenging economies could correlate with credit scores.
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