As the millennial generation continues to head-butt its way into the housing market, credit scores are creating a sizable burden on their ability to purchase a home. A recent Rent.com survey stated that 78% of the millennial generation renters do not plan on buying a home soon.
Many cite the benefits of renting as their mainstay against home buying. However, in a recent TransUnion survey, 43% of those aged 18-34 blame subpar credit scores.
So why aren’t millennials buying houses?
Inability to obtain a fair mortgage and a general disinterest in buying. Credit score is the biggest hurdle for the younger generation, as most mortgages have a minimum requirement of credit score.
TransUnion found that one third of adults aged 18 to 34 have a credit score in between 300 and 600. A credit score of 620 will score you a mortgage, but anything lower is a crapshoot.
On average, millennials have a shorter credit history, which means there is more gravity in a missed payment as opposed to an older home buyer. Millennials do not have the cushion of a long credit history, so their mistakes are more prominent, resulting in lower scores.
Another thicket to cut through is the initial cost; the down payment. TransUnion found that nearly 60% of consumers aged 18-34 worry about obtaining a down payment. Coupled with lower credit scores, the task becomes daunting, forcing millennials to stay renting.
It will be interesting to see how the housing market adjusts to masses of millennials renting, and putting off their first home purchase.
Will home prices come down to make up for missed capital or will rents skyrocket and force millennials to reconsider?