54% of Gen Z feel anxious when checking their credit score
Yet, 62% of Gen Z is so anxious about their credit score that they don't look to see what it is, and roughly 1 in 5 have checked their credit score at all, according to a report from USAA Bank titled .
The new report paints a picture of a generation that realizes the importance of a good credit score, but does not know what it takes to achieve that goal. In fact, 45% of Gen Z does not understand what makes a good credit score.
To help address this challenge, USAA Bank has named August 5 "Perfect Credit Score Day" with the goal of helping Gen Z strive toward better credit health.
"We created this day to serve as a compelling reminder of the importance of credit and to empower Gen Z to improve their financial wellness," says Michael Moran, President of USAA Bank. "Financial stress is not stopping Gen Z from having healthy credit aspirations. With the right tools and advice, Gen Z can feel encouraged, not anxious or discouraged, from engaging with their credit score."
What's holding Gen Z back when it comes to the issue of credit scores? One of the primary hurdles is anxiety, according to the USAA report.
About 54 percent of Gen Z say they experience anxiety over the mere idea of checking their score.
As for actually achieving a good credit score, Gen Z sees many barriers in today's economy, particularly inflation and debt. Respondents in the USAA study say the most significant hurdle to achieving an exceptional credit score is rising living costs (27 percent). That's followed by spending too much (20 percent), credit card debt (17 percent) and student loans (17 percent).
Despite all of the anxiety and financial pressures, Gen Z remains optimistic about achieving a strong credit score – 76 percent feel they can reach an exceptional credit score (800 - 850), and 67 percent want to learn more about improving their credit score, according to USAA's study.
Here are some of the ways to overcome the anxiety and maintain a good credit score.
Understanding the factors used by credit bureaus to calculate your credit score is key to achieving and maintaining a solid score. Your FICO credit score, which is the three-digit score lenders use to determine creditworthiness, is calculated based on several factors, each with a different weight or importance in your overall score. The most important factor to your FICO score is debt payment history, which makes up 35 percent of your total score. That's followed by total amount of debt, which accounts for 30 percent of your score. Understanding and staying on top of these two factors alone can have a significant impact on the health of your credit score.
It's important to avoid taking on more debt than you can reasonably handle and repay. It's also a good idea to avoid opening multiple accounts, as this can make it harder to keep on top of debt and all of the monthly payments.
"Young adults often get bombarded with credit offers. Be very selective. Applying for and opening new credit accounts can hurt your credit score,"says Richard Barrington, financial analyst for Credit Sesame.
And if possible, do not borrow money to make ends meet, says Barrington.
Payment history makes up the most significant portion of your credit score. If money is tight, it's important to always at least pay the minimum due on your credit cards and loans to avoid impacting your credit score. Making your monthly debt payments should be a top priority.
Apps like GoodBudget and YNAB can help you track and manage monthly expenses and spending. Some also allow setting reminders for bill payment due dates. Using these types of tools can help reduce anxiety around money and help you take control of your finances.
It's important to avoid shying away from checking your credit score. Remaining informed about where your score stands and what the report says is important to your financial future, and equally importantly, can help you spot fraudulent activity.
"Checking your score doesn't mean you've failed—it means you're ready to take control," says Brown. "Use free tools from your bank or AnnualCreditReport.com. Once you know where you stand, you can begin building a game plan."
Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox. Sign up here.
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every product review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge and expertise. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every product review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge and expertise. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
