Gen Z Gets ‘A’ for Credit Activity

A TransUnion study compares the credit performance of Gen Z and Millennials when they were younger.

Steve Finlay, Contributing Editor

January 28, 2020

3 Min Read
gen z couple with car
Growing up during recessionary times hasn’t suppressed Gen Z’s appetite for credit, TransUnion says.Getty Images

As they enter the market, young adults who belong to Generation Z – those born in or after 1995 – are securing auto loans and other forms of credit more than their Millennial elders did when they were younger, according to a new study by credit tracker TransUnion.

Moreover, of-age Gen Z members are tallying relatively high credit scores, with 50% of them prime and above. Eight percent of the youngest generation currently are age 18 and over.  

“They are gravitating towards auto loans more than Millennials did,” Matthew Komos, TransUnion’s vice president-U.S. research, tells WardsAuto.

The study looked at the credit activity and performance of Gen Z and Millennials a.k.a Gen Y (consumers born between 1980 and 1994).

For an apples-to-apples view, Komos says TransUnion “went back to the files” to see the credit profiles of Millennials who were between ages 18 and 24 in 2012. The company then compared that with Gen Z consumers ages 18 to 24 as of 2019, adjusting for risk and age differences.

The results indicate that 23% of Gen Z are active in auto financing compared with 16% of Millennials when they were of the same age.

The recession of the last decade affected both Gens Y and Z, but in different ways, Millennials more directly.

Older Millennials came of age during the recession. Many of them had trouble finding jobs at a time of high unemployment.

Conventional wisdom at the time was that Millennials weren’t interested in car ownership, a sobering notion to automakers and car dealers.

In retrospect, it wasn’t so much that Gen Y disdained vehicles. It was that they lacked the wherewithal to buy them. Moreover, credit was tight then, in general but particularly for young people starting out. Post-recession, Millennials have become active car buyers.

In contrast, older Gen Z members were in their teens when the recession hit. Many of them watched their parents struggle, and that affected them in various ways. But growing up during recessionary times hasn’t suppressed Gen Z’s appetite for credit, TransUnion says.

The study notes older Gen Z members came of age when the economy had fully recovered.

“Gen Z rode the wave of a great economy and had access to credit” as lenders loosened up when times got better, says Komos, a member of Generation X (1965 to 1983).

Gen Z had “a comparatively easier entrance into the credit market than did their Millennial counterparts,” he adds.

Other key findings of the study:

  • The lower rate of unemployment during Gen Z’s young adulthood has spurred many of them to join the workforce early instead of immediately going to college. It was rather the reverse for Millennials, many of whom still have student-loan debts to prove it.

  • Gen Z is the first generation of digital natives. “They have come to expect a seamless consumer experience across all walks of life, including how they access, use and manage credit,” says Jason Laky, TransUnion’s executive vice president who heads financial services. Adds Komos: “Lenders should offer them a value proposition. It still has to make sense to the consumer.”

About the Author(s)

Steve Finlay

Contributing Editor, WardsAuto

Steven Finlay is a former longtime editor for WardsAuto. He writes about a range of topics including automotive dealers and issues that impact their business.

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