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

CNBC Select breaks down the findings from Experian's 11th annual State of Credit report.

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Experian's latest State of Credit report found that Americans of all ages are maintaining healthy credit profiles, despite the economic fallout brought on by the Covid-19 pandemic

The credit bureau's 11th annual credit report highlights that, on average, consumers are managing their credit better year over year. Younger consumers, in particular, are showing responsible credit management trends.

Some of the behaviors attributing to young people's success include lowering overall credit card debt, reducing credit utilization rates and making fewer missed payments. The report further breaks down the credit performance across each generation, looking at credit scores and borrowing behaviors.

Here's what we decipher from Experian's 2020 State of Credit report.

Younger borrowers are driving the year-over-year increases

According to Experian's analysis, Gen Y (also known as millennials, ages 38-25) and Gen Z (ages 24 and below) have had the greatest positive changes to their credit profiles. In its report, Experian uses data from Q2 2019 and Q2 2020 and looks only at VantageScore credit scores, which range on a scale from 300 to 850.

The three takeaways from Experian that show how young consumers are leading the positive results are summarized below:

  1. Gen Y and Gen Z borrowers have seen the most significant drop in their credit utilization rates, lowering by 5% and 6%, respectively. Both groups are maintaining a utilization rate under 30%.
  2. Gen Y and Gen Z are carrying more credit cards than they were last year, but their overall credit card balances have decreased.
  3. Gen Y and Gen Z have had the greatest increase in their average credit scores, up 11 points for Gen Y and up 13 points for Gen Z.

There's a lot we can learn from millennials and Gen Z consumers when it comes to improving our overall financial health. Paying down credit card balances and making on-time payments are both major drivers in improving a person's credit score. To see for yourself where your credit utilization rate stands, look to your credit report, which shows your total credit usage.

Consumers can pull their credit report for free from the three main credit bureaus — Experian, Equifax and TransUnion — on a weekly basis at AnnualCreditReport.com. You can check your credit score for free or consider signing up for a credit monitoring service. Credit monitoring tracks your credit score for you and alerts you of any real-time changes to your credit report, good or bad.

CNBC Select ranked our top picks, and the best services that come at zero cost are CreditWise® from Capital One and Experian free credit monitoring.

CreditWise® from Capital One

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

See our methodology, terms apply.

Experian Free Credit Monitoring

Experian Free Credit Monitoring
On Experian's secure site
  • Cost

    Free

  • Credit bureaus monitored

    Experian

  • Credit scoring model used

    FICO

  • Dark web scan

    Yes, one-time only

  • Identity insurance

    No

See our methodology, terms apply.

Instantly raise your credit score: Another resource that provides an opportunity to quickly boost your credit score is Experian Boost. The free service lets you add your on-time phone, internet, cable, utility (gas, electricity, water) and streaming payments to your Experian credit report. According to its website, average users receiving a boost reported a 13-point increase in their FICO Score.

How generations compare to one another

In breaking down their 2020 findings by generation, Experian was able to find that younger borrowers still stood out when it came to paying their bills and keeping a low balance on their credit cards.

The below are four results from Experian's report.

  1. Lowest delinquency rate: Gen Z (the youngest cohort) has had fewer missed payments than all other generations, except the Silent Generation (the oldest cohort, ages 74 and above). This is a marked improvement from Experian's 2019 data, which showed Gen Z as having the highest delinquency rate.
  2. Highest credit card balance and overall credit utilization: Gen X (those between the ages of 53-39) have the highest average credit card balance at $7,718, along with the highest credit utilization rate at 32%. Experts recommend a utilization rate below 10% for achieving the best credit score.
  3. Lowest credit card balance and credit utilization: Gen Z has the lowest average credit card balance at $2,197, and the Silent Generation has the lowest utilization rate at 13%.
  4. Highest credit scores: The older generations (Silent Generation, Boomers and Gen X) have the highest credit scores, but this is likely driven by having a longer credit history and access to more credit lines than younger borrowers.

Bottom line

The results from Experian's latest State of Credit report are overall positive in the growth of consumers' credit health year over year.

While younger consumers are leading the charge, staying on top of your credit is crucial for a healthy financial future no matter your age.

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