Young People With Poor Credit Struggle With Debt, Budgeting

Tuesday, January 2nd, 2018
Updated: January 2nd, 2018
The content is accurate at the time of publication and is subject to change.

There’s been a lot of talk lately about how Millennials are dealing with their finances more responsibly than previous generations – avoiding debt, checking their credit scores, and even saving for homes. But for young people who don’t have great credit and live paycheck-to-paycheck, it’s a different story.

A series of studies conducted by Elevate’s Center for the New Middle Class showed that of Millennials with credit scores below 700 (known as non-prime), 41% run out of money every other month, or even more frequently. Fifty-eight percent of them live from one paycheck to the next, without being able to save anything.

“It’s troubling to see just how hard of a time these Millennials are having managing their day-to-day finances,” said Jonathan Walker, the Elevate Center’s executive director. “Our research shows that half of non-prime Millennials worry all the time about their monthly living expenses.”

Having poor credit linked with other troubles

Key findings of the study include the fact that 64% of non-prime Millennials say they have “too much debt.” When faced with coming up with $1,2000 for an emergency, non-prime Millennials are 71% less likely than their peers with better credit scores to rely on a credit card for the funds. Only 37% of them feel confident that they could scrape up the $1,200 within a month.

Young people with poor credit may have a hard time finding a credit card that will approve them; for folks with limited credit, a secured credit card is often a good option, or a credit card specifically designed for people rebuilding their credit.

“Only half of non-prime Millennials feel that they are adept to deal with day-to-day financial matters, compared to three-quarters of their prime counterparts,” said Walker. “Factors such as lack of financial education, income volatility, too much debt and unexpected expenses contribute to difficulty in maintaining a balanced financial life.”

In addition to trouble coming up with money in case of an emergency, young people with sub-prime credit scores are also more likely to run into unexpected car repair expenses and non-routine medical costs. “Carrying the burden of financial anxiety can affect other aspects of life, such as personal relationships,” said Walker.

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