What Young Adults Really Know About Credit — The Good, Bad, and Scary

by | Jun 7, 2021 | Credit

Over the past year, we talked to more than 2,300 high school and college students. Collectively, they’ve answered 28,548 questions about money, investing, and their future.

The more we’ve learned, the less we realize we know (e.g., mom jeans are cool, the laughing emojis 😂 not so much). But at the same time, we’re encouraged.

Young adults are prone to saving more than prior generations. They’re tech-savvy and care deeply about equality, fairness, and the environment.

But there is one thing that young people don’t understand that surprised us: how to build credit.

First, some good news.

Young adults over 18 generally understand why building good credit is essential. We asked them:

What are the benefits of having good credit?


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What did young adults choose?

Most (97.8%) of Young Adults selected the correct answer.

🚫 Get better interest rates on credit cards (0%)

🚫 Better rates on auto or home insurance (0.4%)

🚫 Easier time renting an apartment (0.9%)

🚫 Cheaper to borrow money (loans to buy a car) (0.9%)

✅ All of the above (97.8%)

Now, for the not-so-great news.

When it comes to the actual mechanics of building good credit, young adults over 18 get pretty low marks. They don’t understand how credit cards actually work.

In a survey of college students,

  • 61% said they do not know the specific steps to building a credit score.
  • Beyond credit, less than half knew what they have to pay to not incur credit card interest.
  • Just under a third were unsure how to make an actual payment.

Young adults are generally unsure how or where to go to access a free credit report, how or where (or why) they should report a dispute, and where to begin if they encounter fraud.

Despite the lack of knowledge, people qualify for credit cards all the time.

Giving an uninformed person a credit card is akin to giving them keys to a powerful (but dangerous) car even though they flunked their driver’s exam (or, in this case, never had to take an exam in the first place)

But here is the really bad news:

The biggest issue with all of this is that early mistakes with credit cards have really, really long-term implications. Small mistakes now can take literally years to fix. Sadly, this is not a well-known fact. We asked 1,000 students:

If you happen to miss a late payment and it is sent to collection, how long will it remain on your credit history?


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What did young adults choose?

Less than half (46%) of Young Adults got the answer correct.

🚫 Less than a year (11%)

🚫 1 year (19%)

🚫 3 year (24%)

✅ 7 years (46%)

Bad credit has dire consequences – making it harder to rent an apartment, more expensive to get a loan, even count against you when searching for a job. And it can take years to fix.

99 Problems. 1 New Solution.

The challenge is clear and larger than we ever imagined: most young adults aren’t equipped with the guidance to help them understand and build credit.

In response, our innovation lab spent the last 12 months listening to users, running pilots, and working with young adults to co-create a new program.

That result? The CommunityAmerica Starter Credit Card – a unique program designed for first-time credit cardholders.

How unique? Well, for starters, we pay new cardholders up to $40 to build better credit habits. We direct deposit this reward in their saving account during the first six months.

The catch? They pay their bills on time (the #1 way to build credit) and learn about credit by playing our credit 101 trivia game.

And let’s face it, young adults are busy, so we send new cardholders text messages (their preferred communication method) to remind them to pay their bills, set up alerts, even what to pay to avoid interest.

Our goal is to put new account holders on a path to building rock star credit scores. To help, every cardholder gets access to free credit monitoring accessed directly from our 5-star mobile banking app.

Some skeptics may ask how we can do that. My response? When it comes to the next generation, how can we afford not to?

And, if you have spent any time at CommunityAmerica at all, you probably are not surprised. We are in the business of delivering financial peace of mind and putting our members on a path to thrive.

You can learn more about the CommunityAmerica Starter Credit Card here.

Anita Newton

Chief Innovation Officer

Anita Newton serves as Chief Innovation Officer at CommunityAmerica, a $4 billion credit union headquartered in Kansas City. She leads an innovation lab whose mission is to create products, services, and experiences that deliver financial well-being for their members and the communities where they live.

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