A high credit score can unlock the door to increased credit access and low interest rates, and millennials appear to be keyed into this fact more than other generations.
Discover Financial Services commissioned market research firm Dynata to survey 2,150 adults for its annual Credit Health survey. The data gauges consumers’ awareness of the importance of credit, as well as their knowledge about their own credit standing. While a majority of consumers monitor their scores, younger consumers appear to be more vigilant about their own credit standing than older generations.
When it comes to their credit scores, most young adults are aware of their status. An overwhelming 93% of millennials — defined in this study as adults between the ages of 18 and 34 — reported being aware of their credit standing. That percentage was up 36 points from 57% in 2017, and significantly higher than the percentage of consumers in older generations who are aware of their credit standing. In fact, 79% of Generation X (those between ages 35 and 54) and 73% of baby boomers (those 55 and older) reported being aware of their credit standing.
Perhaps one reason millennials are paying closer attention to their credit is because they see it as being more important to their daily lives than other generations. More than three-fourths of millennials — 78% — believe their credit standing impacts their day-to-day life, while only 52% of Gen Xers and 35% of boomers believe that to be the case.
On top of that, 65% of millennials said they believe checking their credit score can help them make smarter financial decisions, while only 39% of baby boomers believed that to be true.
Regardless of age, 73% of respondents admitted to thinking about their credit score at least once a month, and 82% said they had checked their credit score at least one time in the past year. Also, 56% said they are currently making an effort to improve their credit score.
However, some may not find the success they are looking for, as the survey unveiled a lack of knowledge among survey respondents about what factors impact one’s credit score. For example, only 47% of respondents correctly reported that credit payment history impacts one’s credit score and only 34% knew that credit utilization — the percentage of your available credit that you are currently using — played a role. Another 18% wrongly believed income affects one’s credit standing and 15% falsely stated that employment history plays a role.
Views were mixed when it comes to how much control consumers ultimately have over their credit standing. While 63% said their credit standing was within their control, 55% did not think a good credit standing was easy to get.
If you’re serious about improving your credit score, the first thing you should do is make sure you have an understanding of the factors that have the biggest impact. That way you can zero in on what needs to be improved. For example, one person may determine that his or her efforts should go toward paying down debt, while another may find it more impactful to focus on paying bills on time. Also, make sure you check all three of your credit scores so you have an accurate perception of your entire credit profile.