Yet while millennials report being rejected more often, their credit scores are not much different than those in Gen Z (ages 18 to 22) and Gen X (ages 39 to 54). Millennials have an average FICO Score of 668, according to Experian data from the second quarter of 2019. FICO scores range from 300 to 850, with "good" scores considered to be any above 670.
Gen Zers have an average score of 667, while Gen Xers are typically at 688. Baby Boomers have a much stronger average score of 731, Experian reports.
If their credit scores are not that different, why are more millennials facing denials? Gen Zers likely have a lower rejection rate because they haven't applied for as many credit products yet. Keep in mind the oldest members of this generation are barely out of college. "Those that are old enough to apply for credit aren't out there looking for massive mortgages or expensive cars," says John Ulzheimer, an expert on credit reporting, who's previously worked at FICO and Equifax.
The higher rate of denials among millennials may be an "unintended consequence" of the CARD Act, which went into effect in 2010, says Ted Rossman, a credit card industry analyst with Bankrate. The legislation banned credit card companies from issuing new credit cards to those under 21 unless they had a job or a co-signer who could pay off the credit line.
"It has become much harder for people in their early and mid-20s to obtain credit," Rossman says. Essentially, some millennials, particularly younger ones, may have delayed applying for a credit card, but were later rejected because they didn't have a robust history.
Another factor is that millennials may depend on credit less frequently than older generations. Several recent surveys and polls suggest many millennials don't have credit cards, while a significant portion prefer debit cards. When this happens, their credit scores end up lower — or nonexistent. But avoiding credit isn't a solid strategy if you're looking to improve your score, Ulzheimer says.
In general, younger Americans tend to have lower credit score potential because they don't have the decades of credit history that older generations typically have, according to Ulzheimer. "There's a metric in both FICO and VantageScore's credit scoring systems that reward you with a higher score ceiling if you've got decades of credit experience on your credit reports," he says.
These dynamics could all shift, however, if there's a prolonged market downturn or recession. "If the employment market tanks and people start losing jobs, then lenders will typically make a flight to quality, which means minimum score requirements will go up," Ulzheimer says, adding that this happened in the aftermath of the 2008 financial crisis.
Actually, carrying a balance on your credit card doesn't increase your credit score
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