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An expert weighs in on what millennials' credit score, debt and credit card usage look like

CNBC Select spoke with Experian's Rod Griffin about Gen Y's credit behaviors.

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Today, millennials, also known as Gen Y, are the nation's largest living generation, making up the greatest share of the U.S. workforce.

This cohort of consumers has long been labeled as slow to settle down and tick certain milestone boxes, such as starting a family and buying a home.

But it's largely their financial circumstances that have put them behind: ballooning student loan debt, inflated living costs and stagnant wage growth, to name a few. And as a generation now experiencing their second financial crisis firsthand, it's only natural that being able to stay financially afloat would likely be an uphill battle.

According to Experian's latest annual State of Credit report, however, even at the onset of the pandemic millennials are improving their financial situation and overall credit year over year.

Using data from Q2 2019 and Q2 2020, the credit bureau found that millennials are keeping up with their debt payments, reducing their credit card balances and increasing their credit scores.

To get a better idea of the average millennial consumer, we include below a snapshot of Experian's data highlighting this generation, currently aged 24 to 39.

Experian State of Credit Report: Gen Y

Experian 2020 findings Gen Y (Millennials)
Average VantageScore®658
Average number of credit cards2.66
Average credit card balance$4651
Average revolving utilization rate30%
Average number of retail credit cards2.1
Average retail credit card balance$1871
Average nonmortgage debt$27251
Average mortgage debt$232372
Average 30–59 days past due delinquency rates2.7%
Average 60–89 days past due delinquency rates1.5%
Average 90–180 days past due delinquency rates4.4%

Below, Select highlights two big takeaways from millennials' borrowing behaviors and Rod Griffin, senior director of public education and advocacy for Experian, weighs in on what this generation should be on the lookout for.

1. Millennials increased their mortgage and nonmortgage debt levels year over year

Despite their reputation of being renters, millennials are becoming homebuyers as they grow older. Experian data shows that millennials' debt loads are increasing steadily as they borrow more to finance the financial milestones we mentioned above, such as putting a down payment on a first home.

Even before 2020, millennials were on their way to home buying. According to Experian research released in March of this year, this generation has seen the largest increase (+58%) in their total average debt from 2015 to 2019. The total average debt number is driven largely by mortgage debt, but also includes credit cards, car loans, personal loans, student loans and home equity lines of credit (HELOCs).

What millennials should be on the lookout for: As more millennials come of home-buying age, it's crucial to understand how credit can help you. "When used responsibly, credit can be a financial tool to access the things many of us want in life," Griffin says.

The best part, Griffin points out, is that with mortgage and nonmortgage debt levels rising, millennials are making sure to keep up with their monthly payments: "The important thing is that they have fewer missed payments year over year, showing they are managing the debt they are carrying well."

2. Millennials saw an 11-point increase in their credit scores

According to Experian's data, millennials' on-time payments have certainly paid off in more ways than one. Firstly, millennials have reduced their credit utilization rate (their balance-to-limit ratio) by 5% compared to last year. Secondly, millennials have seen an increase in their credit scores, now having an average 658 VantageScore®.

Learn more: Millennials and Gen Z are leading the charge in bettering their credit—here's how other generations compare

What millennials should be on the lookout for: Although a 658 credit score is considered fair and has room for improvement, it is an 11-point increase from millennials' average scores last year, Griffin says. He also notes that the decrease in millennials' utilization rates is a positive sign. "This will need to continue to decline to see an average score increase for millennials," Griffin says.

We can see the positive effect that making fewer missed payments has on millennials' credit scores. It's important to remember that your payment history is the biggest factor in having a solid score. As you grow older, make sure you prioritize paying your bills on time to help build a long, healthy credit history.

"Building a credit history takes time and we generally see credit scores improve with age," Griffin says.

To make sure your credit score is in a good place when you most need it, be proactive about managing your credit history starting today. Pay your credit card bills on time (and in full when you can), pull your credit report at AnnualCreditReport.com (it's free to do) and check your credit score often. Doing these things can help you improve your credit standing and financial health in the long run.

Consider signing up for a credit monitoring service that helps you keep track of changes to your credit in real-time. Both CreditWise® from Capital One and IdentityForce® made Select's ranking of the best overall picks for free and paid services, respectively.

CreditWise® from Capital One

Information about CreditWise has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
  • Cost

    Free

  • Credit bureaus monitored

    TransUnion and Experian

  • Credit scoring model used

    VantageScore

  • Dark web scan

    Yes

  • Identity insurance

    No

Terms apply.

IdentityForce® UltraSecure and UltraSecure+Credit

On Identity Force's secure site
  • Cost

    For a limited time, 25% off all plans - offer ends 9/30. UltraSecure+Credit Individual starts at $179.90/yr and UltraSecure+Credit Family at $269/yr. Click "Learn More" for details.

  • Credit bureaus monitored

    Experian, Equifax and TransUnion

  • Credit scoring model used

    VantageScore 3.0

  • Dark web scan

    Yes

  • Identity insurance

    Yes, $1 million for all plans

Terms apply. To learn more about IdentityForce®, visit their website or call 855-979-1118. 

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.