Not all credit scores are created equal.
New research from Experian provides a glimpse into how different generations handle debt and finances. The disparity between the various demographics suggests that the phrase “generation gap” may not be solely reserved to describe the hordes of Twitterers who were oblivious to the existence of one Paul McCartney, or the snail-like text messaging speed of parents that baffle Gen Y’ers.
The study gathered information from four demographics: the Greatest Generation (ages 66 and over), baby boomers, (ages 47-66), Generation X (ages 30 to 46) and Generation Y (ages 19 to 29). While mortgages absorbed the greatest amount of debt across all generations alike, credit habits differed depending on which decade one was born in.
According to the results, baby boomers tended to stay at or under the national average in nearly every category in terms of debt, except when second mortgages entered the picture. Here, boomers were proportionally 23 percent higher than the national average. Nonetheless, the demographic is described as having good credit, managing their debt well and thus remaining strong and stable in their pursuit of the American Dream.
Michele Raneri, Experian's vice president of analytics, told The Huffington Post:
“When you compare them with the other three generations, baby boomers have a really interesting mix in that they have a high debt in terms of $102,000 (compared to the national average of $78,030), but they also have a really good score at 782 (compared to the national average VantageScore of 751). What that means is that they’re not maxing out their cards and they don’t have collections. For the most part, they really know how to use credit as a tool, take out debt and repay it well.”
While baby boomers emerged with a passing grade, the most impressive demographic of the bunch proved to be the Greatest Generation, who had a firm grip on their finances and passed with flying colors. As post 50s move into the next phase of life, one that may be characterized by the end of full time work or reliant upon a fixed income, Raneri hopes they follow in the footsteps of their parents when it comes to keeping funds in order. Consumers in the Greatest Generation "have a really low number of payments that are late; they’re rarely ever late and they hardly max out their credit at half of the U.S. average. They’re an exemplary model of how one uses credit as a tool.”
While their proximity to the historic events of Great Depression might be one folks in the oldest demographic understand how to manage money, Raneri reminds us, “The rules of credit apply to all generations.” So whether you grew up listening to The Beatles or Nirvana, heed Raneri’s advice: “Use credit wisely, pay on time and don’t max out. If you slip up or come up late on a bill, don’t hide from it. Just fix it and build that score back up.”
Here are 8 ways to improve your credit score according to www.livecreditsmart.com.