Has the past month in the global economy brought to mind memories of the financial crisis? Today we tend to ‘sign-post’ things in terms of the great recession. There is news in consumer credit along those lines, according to Fair Isaac Corporation (FICO): The average FICO credit score is now 695 – the highest that average has been in a decade.
Credit unions have a unique mission, educating their members in addition to providing them with financial services. That would be in contrast to taking advantage of unsuspecting customers, but I digress. Credit union member education begins something like this – basic money management (or how not to be broke):
- Pay your bills on time.
- Pay down that credit card debt.
- Seriously, do you really need those $200.00 jeans?
Everyone has heard it all at this point, but interestingly people have actually began to do these things. For one reason, it’s a lot easier now for consumers to know what is going on with their credit. The Consumer Financial Credit Bureau, for instance has been pushing banks and creditors to give credit scores away for free. American Express has recently made FICO scores available to their card holders. Could this trend be helping consumers raise their credit scores? Maybe.
Lost in this seemingly good news is the fact that a group of consumers have given up on credit cards, and many of the credit ‘drop outs’ are millennials. It could be that young adults have seen their parents go through financial trauma, or simply, that they are a little more risk averse. Either way, younger consumers who are unfamiliar with how credit works might not know that this strategy is working against them. Hard to build good credit when you don’t use credit! Millennials (who also happen to be the largest segment of the US population) take the title for being the least credit savvy when compared to previous generations. A recent Experian study revealed that millenials’ average credit score is 625, which is 70 points below the national average.
While credit unions work hard to capture the attention of millennials through their technology offerings, such as mobile banking and mobile lending, they should also keep in mind that the financial education of their younger members will help ensure growth, for both themselves and their members. Millennials are at a prime age to establish great habits that are certain to impact their credit future, and with the right help, the ‘credit’ sky is the limit.
