The average American carries almost $80,000 in debt and has a credit score of 751 – a number that falls into the “C” range on VantageScore’s A to F grading scale. While these figures alone paint a general impression of the state of personal debt and credit in the United States today, there are considerable differences among Americans of different statuses and backgrounds. For example, even though income isn’t calculated into your credit score, wealthier Americans generally have a greater capacity to pay off their debt and achieve a high rating.
Debt loads and credit scores also vary substantially when age is taken into account. As shown in a new infographic below, each generation has different reasons for debt and different credit histories. An examination of the infographic further gives us an idea of the priorities and challenges held by each generation.
The Greatest Generation, which includes anyone over the age of 66, is on the whole the strongest and most secure from a debt perspective. Members of this generation have the highest average credit score (an 829) and boast an average debt of $38,043 – over 51% below the national average. Due to its greater financial security and more advanced position in life, this generation has the luxury of working to reduce its debt without taking on any further monetary burdens. Most debt among Americans older than 66 is tied up in a home mortgage.
The next youngest generation is the Baby Boomers, which include anyone between the ages of 47 and 65. The Baby Boomers are working their ways towards a debt situation similar to the Greatest Generation, but they are not quite there yet. They hold a lower average credit score (782) that is nonetheless solidly above the national average. They also report a far higher amount of debt than the Greatest Generation – at over $101,000 per person, this debt load well exceeds the national average. So how can this high debt figure be explained in light of a solid credit score? For the average Boomer it all comes down to housing. Although their debt falls below the national averages in every other category, Boomers are still paying off their second mortgage and have amassed a considerable amount of debt in this area.
The generation with the highest amount of debt is Generation X, which has an average debt load of $111,121. This figure falls 42% above the national norm. Gen Xers also have lower than average credit scores (718). We can explain the substantial debt burden carried by this generation by their more transitory nature. They are old enough to have mortgages, families, and other expenses, but they are also young enough to still hold student loans. Since this generation covers a period of increasing earning potential, a higher debt figure is not necessarily a bad sign for people of this age.
Our youngest generation includes Americans in the 19 to 29 age range – Generation Y. Not too surprisingly, Generation Y has the lowest debt load of all the age groups ($34, 765) but also the lowest credit score (672). These figures can be explained by Generation Y’s youth; they are not old enough to have amassed considerable debt or to have boosted their credit rating. Most of the debt held by this generation goes into a home mortgage, although in a relative sense it far exceeds the national average when debt involving student loans, auto loans, and retail cards is taken into consideration. Gen Y simply does not currently posses the income to shoulder many of its expenses.
This breakdown goes to show that a person’s debt load – and, by extension, their personal finance situation – can be explained in part by the circumstances surrounding their age bracket. As each generation continues to grow older, we can only hope that the X and Y groups will someday achieve the financial security, credit scores, and minimal debt burdens enjoyed by the Greatest Generation.