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Young Americans have fallen seriously behind

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Valued Contributor

Young Americans have fallen seriously behind

Millennials Are Helping to Sound the Credit Card Alarm 

Young Americans have fallen seriously behind on their payments, adding to angst about the true health of U.S. consumers.

 

Bloomberg Article


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Message 1 of 14
13 REPLIES 13
Moderator Emeritus

Re: Young Americans have fallen seriously behind

RicHowe ... "Don't Leave Home WIthout It" and time to tattle and inform the main banks to troll the MyFico Forum and start chopping limits on the ever inflating credit limit rates of the board posters Smiley Happy!

 

Always glad to "poke the bear" for a good cause Smiley Wink

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Message 2 of 14
Valued Contributor

Re: Young Americans have fallen seriously behind

It kind of feels like confusing times right now. With the unemployment ratebeing the lowest it has ever been. Housing market it on the rise, and once again a sellers market. As well as the stock market doing well, it all seems to point to a good economy.

 

Yet on the flipside, we hear all these stories that debt is at staggering levels. 

 

Also of note, all the business that have been closing stores left and right, not to mention filing for bankruptcy. Seems to tell a different story.

Wouldn't rising debt indicate increased shopping on some level?  

Message 3 of 14
Valued Contributor

Re: Young Americans have fallen seriously behind


@Janus wrote:

It kind of feels like confusing times right now. With the unemployment ratebeing the lowest it has ever been. Housing market it on the rise, and once again a sellers market. As well as the stock market doing well, it all seems to point to a good economy.

 

Yet on the flipside, we hear all these stories that debt is at staggering levels. 

 

Also of note, all the business that have been closing stores left and right, not to mention filing for bankruptcy. Seems to tell a different story.

Wouldn't rising debt indicate increased shopping on some level?  


I think the economy as a whole is in good shape, but there's an increasingly obsolete minority within American society that cannot accept or doesn't realize they're obsolete. I can see why they'd think the economy isn't so good, but they're also too blind to realize it's not the economy, it's them. There's plenty of jobs out there, but if someone insists on being an assembly-line manufacturing worker, coal miner, fast-food cashier, or some other job easily replaced by a machine running Linux, they're going to see the economy as bad since their individual prospects are grim.

 

I would apply a similar line of reasoning to the closing stores scenario. Some stores are closing because they didn't adapt to the changing ways in which goods and services are sold, while others are getting steamrolled by the uncontrolled Amazon behemoths in the market. They see it as mom-and-pop shops are being crapped on, whereas the reality is that the market they tried to be a mom-and-pop shop in either is no longer conducive to mom-and-pop shops or was unable to make themselves unique/prominent enough to rise above the other businesses.

 

For the debt situation, in my opinion there's two factors:

1. Student loan debt - it's increasingly necessary and increasingly expensive.

2. Living beyond one's means, so yes, increased shopping/consumerism. People who claim to have to live paycheck to paycheck and also attend a Black Friday sale are lying to themselves about something.

Message 4 of 14
Contributor

Re: Young Americans have fallen seriously behind

I blame the lender and how they determine risk and reward, not the borrower.

 

Basing an opinion on blaming low hanging fruit and the persistent myth of how millennials are to blame for everything is nothing new and just click bait anymore it seems. It’s always the younger generations fault. It’s comical even because every older generation blames the younger since cavemen have been whining about how younger cavemen ruined it for everyone with the wheel and fire. Or how sliced bread was the indicator of the end times and how evil that young man who came up with it was.

 

That does not make those statistics untrue, but “correlation does not imply causation”.

 

Is it baby boomers with 72m worldwide projected to die next year with significant amounts of debt that is the true alarm? This is why we have ageism when credit lending. Goes both ways for young and old though.

 

Or how about my favorite theory, Gen X between the ages of 40-54. In 2009, soon after the crash in 2008, there were a record number of Chapter 7 and Chapter 13 bankruptcies. The statistics are terrifying and dismal when reflected on. Those bankruptcies have fallen off or are recently falling off in the last few years. This is the year. In the next year or two most will have fallen off. Did that generation learn anything or do they now get to start over and repeat history? We’ll see.

 

I think the true cause is lenders and how they determine risk with nominal data from antiquated evaluation assessments from credit scores, no matter which scoring model we’re talking about.

 

It’s as simple as technology and information being accessible more than has ever been in the history of anything that is my theory (just an opinion that could easily be faulty). It’s easy to learn simple basics to improving one’s profile while hiding ones weaknesses with the education to do so readily at hand when it comes to credit profile building or repairing. It’s never been easier and believe it or not, that information is being used by the consumer too. The algorithms, other than a few minute exact details, have basically been broken because of how informed the consumer is. Just average folks who can't name all three bureueas and don't have a myFICO forum account know their data is being tracked now and knows simple basics to make it seem better than it all is.

 

Farming metadata to determine the risk of a consumer is the only way to truly figure out a genuinely accurate assessment on the risk/reward and don’t be surprised when that becomes popular. I abhor the thought of it, makes my stomach turn. But it's going to happen.

 

It’s not the Gen X generation and their bankruptcies falling off.

It’s not baby boomers dying.

It’s not millennials.

 

Its lenders falling behind the times. They need to catch up. What millenials have sounded the alarm on is in fact how antiquated the fico scoring model really is, they're the ones with the experience to learn the basics to the algorithms determined when scoring them via technology.

 

The scoring models only work if the consumer doesn’t know they’re being scored.

 

Lenders should stop loaning to risky people.

Message 5 of 14
Frequent Contributor

Re: Young Americans have fallen seriously behind


@omgitsMatt wrote:

I blame the lender and how they determine risk and reward, not the borrower.


 

 

So you think that the person (adult) should not be held accountable for the agreements/contracts in which they enter? Specifically the contracts that outline the terms, such as 20%+ APR? Or even if it's a reasonable APR, but yet the repayment terms will be 50%-80% (or more) of the person's income?

 

The math isn't that hard. Seriously.

 

 

    EQ=830       TU=816        EX=807      INQ=0/0/2     UTIL=1%        AZEO

Message 6 of 14
Valued Contributor

Re: Young Americans have fallen seriously behind


@omgitsMatt wrote:

I blame the lender and how they determine risk and reward, not the borrower.

 

Basing an opinion on blaming low hanging fruit and the persistent myth of how millennials are to blame for everything is nothing new and just click bait anymore it seems. It’s always the younger generations fault. It’s comical even because every older generation blames the younger since cavemen have been whining about how younger cavemen ruined it for everyone with the wheel and fire. Or how sliced bread was the indicator of the end times and how evil that young man who came up with it was.

Don't disagree.

 

That does not make those statistics untrue, but “correlation does not imply causation”.

Don't disagree.

 

Is it baby boomers with 72m worldwide projected to die next year with significant amounts of debt that is the true alarm? This is why we have ageism when credit lending. Goes both ways for young and old though.

Not sure where you're going with this. Are you trying to say that banks are taking things out on younger people because older people are screwing them? What happened to correlation and causation?

 

Or how about my favorite theory, Gen X between the ages of 40-54. In 2009, soon after the crash in 2008, there were a record number of Chapter 7 and Chapter 13 bankruptcies. The statistics are terrifying and dismal when reflected on. Those bankruptcies have fallen off or are recently falling off in the last few years. This is the year. In the next year or two most will have fallen off. Did that generation learn anything or do they now get to start over and repeat history? We’ll see.

I don't think learning or not learning will have anything to do with their age. As a Gen-X myself, I can say my generation, much like the Millenials, Boomers, and all others, is absolutely riddled with idiots and selfish people. And, just like any other generation, we live in a system where they can start over and repeat history, because the historic alternative was a bit extreme. While I'm the first the chastise those who are irresponsible, I will also be the first to condemn debtor's prisons because that system also didn't work.

 

I think the true cause is lenders and how they determine risk with nominal data from antiquated evaluation assessments from credit scores, no matter which scoring model we’re talking about.

There's some degree of predation there, and it could use some reeling in, but we should not and cannot wring our hands of guilt as debtees. Those mortgages and credit cards weren't forced upon people; people accepted them and signed for them willingly. They are as much to blame, if not more, for their selfish pursuit of whatever psychological need they're filling by having to live above their means. Owning a home or a car isn't a right.

 

It’s as simple as technology and information being accessible more than has ever been in the history of anything that is my theory (just an opinion that could easily be faulty). It’s easy to learn simple basics to improving one’s profile while hiding ones weaknesses with the education to do so readily at hand when it comes to credit profile building or repairing. It’s never been easier and believe it or not, that information is being used by the consumer too. The algorithms, other than a few minute exact details, have basically been broken because of how informed the consumer is. Just average folks who can't name all three bureueas and don't have a myFICO forum account know their data is being tracked now and knows simple basics to make it seem better than it all is.

People game the system for selfish gain. All the more reason not to let them off the hook when they drown.

 

Farming metadata to determine the risk of a consumer is the only way to truly figure out a genuinely accurate assessment on the risk/reward and don’t be surprised when that becomes popular. I abhor the thought of it, makes my stomach turn. But it's going to happen.

Isn't that what FiCO scores are doing? You will never come up with an algorithm that can't be gamed eventually, just like you can never come up with an encryption algorithm that can't be defeated eventually. I guess you could constantly rotate the algorithm, but that's not accomplishing anything new aside from making things harder than they need to be.

 

It’s not the Gen X generation and their bankruptcies falling off.

It’s not baby boomers dying.

It’s not millennials.

 

Its lenders falling behind the times. They need to catch up. What millenials have sounded the alarm on is in fact how antiquated the fico scoring model really is, they're the ones with the experience to learn the basics to the algorithms determined when scoring them via technology.

See above. There's no system that can be made that won't be antiquated in no time. Side note: Vantage was sort of an attempt at modernization and change, and it's super popular</sarcasm>.

 

The scoring models only work if the consumer doesn’t know they’re being scored.

Good luck with that one. Chase has a secret sauce they use, but that doesn't mean people don't know they're being scored. In fact, I think even if people weren't being scored, they're going to assume they are.

 

Lenders should stop loaning to risky people.

Sure, but then 75% of this country wouldn't be able to live beyond their means in a futile attempt to convince themselves and everyone around them they aren't as meaningless or as average as everyone around them. Aside from the growing Stealth Wealth population, this country on the whole has a serious Keeping-Up-With-The-Jonesdashians problem that banks are all to happy to exploit.

 

Banks suck for exploiting people's idiocy and people suck for being idiots in the first place.

Message 7 of 14
Contributor

Re: Young Americans have fallen seriously behind

I absolutely agree, millenials and anyone else that commits to credit of any nature is entirely responsible for their woes. You both are absolutely right and no reason whatsoever absolves anyone of that debt when the terms were honored by the lender. If I commit to a cutthroat line of credit I'm responsible, no questions asked.

Baby boomers and Gen X examples are also examples of correlation doesn't equal causation. That was the point I was trying to make, not assign blame.

FICO scores will probably be the staple used to determine risk for a long time, I don't mind that either. It's not going anywhere and I don't have any strong opinions on it tbh.

A lender is accountable too however. When you choose to loan to high risk consumers you actively invite debts that get defaulted on.

My ramblings earlier and now was all leading to this strong opinion below.

I find blaming young Americans for sounding the credit "alarm" hypocritical and humorous as the blame is shifted entirely onto them instead of lenders making risky loans and splitting the responsibility.

Message 8 of 14
Moderator Emeritus

Re: Young Americans have fallen seriously behind


@omgitsMatt wrote:

I find blaming young Americans for sounding the credit "alarm" hypocritical and humorous as the blame is shifted entirely onto them instead of lenders making risky loans and splitting the responsibility.

If there's anything to be learned in this day and age it's don't believe everything that's read on the Internet.

 

Are there some distinct idiosyncracies unique to millenials?  Sure, but the same is true with GenX and Boomers and everyone in between.  Really I think the debt load that millenials are carrying is simply a function of the rampant consumerism in our economy and the desire to bleed said consumers of every available dollar to keep everything going.  

 

Arguably if everyone woke up and started practicing what even we preach on responsible use of credit, we'd probably cut the consumer stock valulations in half.  

 

I don't know what the right answer is here, but to your point it isn't demonizing one group of people.  Hardly anyone I've ever met, including myself, truly learns from mistakes other people make... at one point in my life I owed nearly a quarter of a million dollars to the federal government with very little in the bank and I never want to go back to that, and as such I live a small financial life (well except for the Tesla Model 3 which I'll just note is exceptionally dirty right now, I so don't fit in with LA where people define status in part by their car's prettiness) and arguably am part of that burgeoning Stealth Wealth movement that iced mentioned assuming the absolute financial bonanza this year has been continues over the next few years.

 

So in the next downturn when our unemployment triples to 10% or whatever and people can't make their debt payments, and it's probably going to be millenials which bear the brunt of that (fewer financial assets, lack of home ownership/equity to leverage, less experience to pass the resume screening process for the same job along with those of us who don't have a college degree, hi) and there will be some who fall too far behind to reasonably catch up, well, it'll happen at some point.  Market and economic expansion cannot happen forever, there will be shocks even in planned economies.  

 

As a result all we can do as individuals is put ourselves in the best position possible; in my case I've been throwing money into investments as fast as I can make it and in the miracle of relatively small numbers. vs outsized income from multiple jobs I've expanded my net wealth, even with the darned car purchase by over 33%.  That plus really looking what it would take to get absolutely debt free is how I'm preparing for the next issue whenever it occurs... everyone else is going to have to make their own decisions but to be fair to them, there's been lots of handouts in the past and even I with my belief my life and it's issues are all my fault, can't fault people thinking they should get some too.

 

We only know the world as it's presented to us.  Choices, yay.




        
Message 9 of 14
Contributor

Re: Young Americans have fallen seriously behind

I like your insights and thoughts on it more than my own Revelate.
Message 10 of 14
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