Millennials are less likely than baby boomers to identify milestone life events that could affect their credit, according to a new survey released by TransUnion. In fact, less than half of millennials surveyed could cite specific major life events that could negatively or positively affect credit, such as divorce (40 percent compared to 57 percent of boomers) or the death of a spouse (26 percent compared to 48 percent of boomers).
“It’s important for all people to understand the effect of life milestones on their credit so they can put themselves in a position to reach personal and financial goals,” says Ken Chaplin, senior vice president at TransUnion. “This survey reveals that many people, especially younger adults, may not be prepared for how certain events, such as marriage, buying a home or getting a car could alter their credit scores.”
According to the survey, consumers of all ages are generally unprepared for life events from a credit perspective because they don’t check their scores before or after the life event. Only 49 percent of all respondents says they checked their credit when planning for or experiencing a milestone, such as marriage, having a child or becoming unemployed.
Respondents were only slightly more likely to check their credit when taking out a loan than they were when preparing for other life events. Fifty-eight percent indicated they did check their credit when applying for a mortgage and 56 percent says they did when pursuing a student loan.
“Many different events – from major life milestones to small incidents – can enhance or damage your creditworthiness,” says Chaplin. “It’s worth investing in a credit monitoring service that can keep you informed about how events in your life are altering your score.”
The survey found that, in general, millennials were more aware of the possible credit impact of ordinary life events than they were about the possible impact of major life milestones. For example, at least two-thirds of millennials identified that having a joint account with their spouse (65 percent), making late rent payments (76 percent) and filing for bankruptcy (83 percent) all have the capacity to affect one’s credit.
With each life milestone, it’s important for people to review their financial habits and credit standing. TransUnion advises the following for those preparing for life changes:
- Getting Married: Before getting married, it’s important to talk with your partner about finances. Less than half (43 percent) of millennials knew that getting married can affect their credit. Openly discussing finances with your partner is the best way to prevent future disagreements. And don’t forget to review your credit reports with one another.
- Buying a Home: Check your credit report for accuracy, confirm that your scores are where you want them to be, and that no one else has access to your credit. Only 58 percent of survey respondents indicated they checked their credit when applying for a mortgage.
- Buying a Car: Your credit can affect the car buying process – from getting financing to figuring out the right payments – but just two of three millennials (66 percent) knew that taking out a car loan affects credit. It’s important to decide what you can realistically spend monthly on a car payment and think about the cost of fuel and periodic maintenance.
For more information about TransUnion’s Credit Monitoring service, click here.