While millennials are borrowing more than pre-millennials and post-millennials, they are still conscious about how much debt they are taking up…
Did you know that India’s millennials fall in the biggest borrowers’ category within the country? Unlike baby boomers who aren’t much open to borrowing credit, recent studies have revealed that millennials are avid borrowers and spenders. They are more open to taking loans or relying on Credit Cards to fund their online purchases, holidays, weddings and more.
While millennials are borrowing more than pre-millennials and post-millennials, they are still conscious about how much debt they are taking up and how these debts can affect their financial lives. A recent study by credit bureau CIBIL revealed that more and more millennials are taking their Credit Scores seriously. As per the study, the number of ‘self-monitoring’ millennials has gone up by 58% as compared to a mere 14% growth among the non-millennial category. ‘Self-monitoring’ here refers to individuals who regularly check their CIBIL report and score.
Additional Reading: Top 5 FAQs About Credit Score
Why Does Your Credit Score Matter?
Your Credit Score is the secret to a smooth financial life. It helps financial institutions decide how creditworthy you are and how well you can handle credit. A healthy Credit Score not only makes you eligible for loans and Credit Cards but also gets you great deals, low interest rates, better credit limits and quicker application approvals. If you have a good Credit Score, then lenders are bound to trust you as the risk of non-payment of dues is negligent.
In case you aren’t aware, your Credit Score is basically a three-digit number between 300 and 900 which is calculated based on your credit history. A score of 750+ is generally considered as good by lending institutions across the country.
Now, coming back to millennials and Credit Scores, the CIBIL study also revealed that ‘self-monitoring’ millennials had an average Credit Score of 740. This is higher than the average score of non-millennials, which is 734.
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Boomers Vs Millennials
While boomers follow the ‘save first’ mentality, millennials are more the ‘consumption first, payment over time’ type. There are significant differences in habits and lifestyles between millennials and boomers, and these differences are bound to affect the way they view their finances too.
Millennials are open to borrowing credit for their living as well as aspirational needs – from funding their vacations, buying a house or car, or purchasing big-ticket items. Boomers, on the other hand, make such purchases out of their pockets, i.e. once they have enough saved to make the purchase. While we do agree that funding lifestyle expenses with borrowed credit isn’t a smart move, considering the thin line between spending within one’s means and overspending, the millennial population is smart enough to keep track of their finances, actively keeping an eye on their credit history and seeking information that can help them manage their creditworthiness.
While millennials are more avid borrowers and spenders as compared to the baby boomers, they are well aware of the fact they have to maintain a healthy credit score, especially if they’ve to keep their credit line open. They not only self-monitor their score actively but are also constantly trying to improve their score. As per the CIBIL report, it was noted that almost 51% millennials who had a score below 700 improved their CIBIL score by at least 65 points on average within six months of checking their score.
Additional Reading: What Millennials Have To Say To The Baby Boomers
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