New Research from ID Analytics Finds Once Millennials Are Declined for Credit They May Not Return
Millennials Who Don’t Receive Service Tend to Stop Seeking Service for a Year
Las Vegas — Money 20/20—ID Analytics LLC, a leader in consumer risk management, today shared new research revealing that over six out of 10 millennials declined for credit are not seen applying again for at least 12 months. The study found that millennials often apply for credit but are declined due either to their lack of credit history or to low credit scores, despite often having an ability to repay according to data from the ID Analytics ID Network®, one of the nation’s largest networks of cross-industry consumer behavioral data.
A frequently referenced Bankrate.com study reports that 63 percent of millennials do not have a credit card. While many millennials may not own credit cards, it is not for a lack of applying for credit. New data from ID Analytics finds that millennials are applying for credit cards at higher rates than Generation X or baby boomers (35 percent vs. 29 percent vs. 28 percent, respectively). ID Analytics also found that millennials actually make up a larger percentage of total credit card applicants (35 percent) than marketplace loan applicants (28 percent), indicating that this group is interested in traditional forms of credit.
“Fewer millennials are taking out credit cards than most of us would expect. Financial institutions need to understand why in order to engage this important generation,” said Tiffani Montez, senior analyst at Aite Group.
Decline of a Generation
While they may be applying for credit, millennials have lower credit activation rates than baby boomers. Fewer than half of millennials, the largest generation of U.S. consumers, have credit scores that will qualify them for credit accounts with most mainstream lenders. One-third of millennials cannot be scored by a credit bureau due to their lack of credit history, and of the ‘scoreable’ group, two-thirds of consumers under 30 have subprime or non-prime credit scores. ID Analytics’ research shows that the most common consequence of declining a millennial applicant is that the consumer walks away for at least a year—both from the enterprise and from credit/service seeking altogether.
“Traditional credit scores may have served previous generations well, but their lack of visibility into critical modern credit responsibilities like the payment of cell phone bills leave many millennials with incomplete or nonexistent histories at the major credit bureaus,” said Patrick Reemts, vice president of credit risk solutions at ID Analytics. “Without a complete picture of millennials’ credit, many financial services companies are turning away good consumers, and the bad news for financial institutions is that only ten percent of millennials will re-apply to the same lender once they have been declined.”
Alternative Data Puts a Face to Credit Invisibles
In order to capitalize on these credit invisible millennials and increase market opportunities, lenders will need to use alternative credit data. Alternative data consists of credit behaviors not consistently reported to national credit bureaus, including telecommunications and utilities payments and online lending activity. Using this alternative data, lenders are able to gain a more complete view into a consumer’s credit risk and worthiness, which is particularly crucial for the millennial demographic.
About ID Analytics LLC
ID Analytics is a leader in consumer risk management with patented analytics, proven expertise, and real-time insight into consumer behavior. By combining proprietary data from the ID Network® — one of the nation’s largest networks of cross-industry consumer behavioral data—with advanced science, ID Analytics provides in-depth visibility into identity risk and creditworthiness. Every day, many of the largest U.S. companies and critical government agencies rely on ID Analytics to make risk-based decisions that enhance revenue, reduce fraud, drive cost savings, and protect consumers. ID Analytics is a wholly-owned subsidiary of LifeLock, Inc. please visit us at www.idanalytics.com.
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