Millennials Experience Higher Credit Denial Rates Than Ever

Credit scores are your golden ticket into participating in the economy and becoming a “true” adult. Unfortunately, for many millennials, there’s a massive barrier to entry. According to Bankrate, 58% of millennials are denied credit products or loans because of their score, or lack thereof. For comparison, among Gen X and Baby Boomers, only 53% and 27% are denied, respectively.

Ted Rossman, an industry analyst, suspects that these lower than ever rates are a result of the 2009 CARD Act:

“An unintended consequence of the CARD Act … is that it has become much harder for people in their early and mid-twenties to obtain credit. Establishing credit is a lot like getting started in your career. Everyone wants you to have experience, but it’s hard to get that first experience.”

The CARD Act was designed to protect consumers; however, in protecting them, particularly those under 21, it made it much more challenging to obtain a credit line. By the time you’ve reached 21, you’re likely preparing to graduate college and get your own apartment. Guess what you need to rent an apartment? A credit score.

Length of credit history constitutes 15% of a credit score, which means getting denied for credit and therefore getting a later start can be a detriment to people trying to make a big, life-changing purchase in the near future. When you need credit to build credit, it can become a vicious cycle.

It also does not help that millennials have grown to fear credit in a post-Recession world. It’s important that when you do finally get credit, be sure to be responsible with it.