The coronavirus pandemic is continuing to hit Americans in their wallets. While unemployment is slowly falling, younger Americans are still finding difficulty getting new credit cards or loans. A recent study is highlighting this trend, which is impacting the youngest the hardest when it comes to credit and loan rejections.
YouGov Research Shows Millennials Struggling to Get Credit Approval
According to data from a recent YouGov survey, nearly a quarter of Millennials have experienced rejection when applying for some form of loan this year. The study shows that younger Americans find it more challenging to receive new lines of credit than older age groups.
Here are the results of the study and the percentage of respondents who received a rejection letter for the following types of new credit:
- Credit Cards – 14% of respondents
- Auto Loans – 5% of respondents
- Insurance – 3% of respondents
- Mortgages – 3% of respondents
- Rentals – 3% of respondents
Coronavirus the Culprit
According to Debt.com’s Howard Dvorkin, the coronavirus pandemic’s early stages saw the most loan application rejections. “Traditional creditors, credit card companies, and subprime lenders were scared out of their wits because they didn’t know if they were going to ever see their money ever again,” he said of March, April, and May when rejections spiked.
The rise in rejections is best illustrated in the general uneasiness many banks felt in those early months of the pandemic. Many banks began lowering credit limits and canceling unused accounts to free up capital from tumbling economic forecasts.
Which Age Groups Are Impacted the Most?
Who is most impacted by loan rejections? According to the YouGov report, millennials and Gen Xers were most likely to receive a rejection letter when applying for a credit card or other loan product. Approximately 22% of Gen Xers were rejected this year, second only to Millennials, at 35%. Baby boomers (those aged 56 to 74) were least likely to experience a credit card or loan rejection – at 11%.
While the U.S. economy shows signs of recovery, keeping on top of personal finances is essential for all consumers. This process involves using available credit responsibly, making all payments on time, and monitoring credit scores for changes. Services like Credit Karma, are great for monitoring these tasks.