College Grads Without Credit

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College Grads Without Credit Scores

About 30% to 40% of recent college graduates in the US do not have a credit score, meaning the number of recent college graduates without a credit score is between 570,000 and 760,000. Also, about 1.672 million recent college graduates do not have access to their parent’s credit line in the US. Approximately 70% of college students have one or more credit cards and about 12% of college graduates are an authorized user on their parent's credit card account.

Although the direct data for the total number of recent college graduates who do not have a credit score and do not have access to a parent's credit line in the US is not available publicly, we were able to provide estimated figures. Below is a deep dive into our methodology, calculations, and findings.

METHODOLOGY

In order to obtain the estimated total number of recent college graduates who do not have a credit score and the total number who do not have a credit score and do not have access to a parent's credit line, we began searching for a precompiled data. The sources we searched through include survey reports and other research studies on credit card use etc. such as the Consumer Financial Protection Bureau (CFPB), Bankrate, Experian, and others. The Experian survey was conducted on soon to be college graduates (in just 3 to 4 months) and revealed that "58% of soon to be college grads have a credit card." So, we assumed that the remaining 42% of college graduates would not have a credit card and thus, they would not have a credit score. It further mentioned that "68% of college grads have needed the support of a recent cosigner" and 12% of them needed a cosigner "for a legal agreement for a credit card." So, we have assumed that 12% of college graduates may have taken their parents as cosigner while applying for a credit card. This implies that 12% of college graduates have access to a parent’s credit line.

Apart from this, the Consumer Financial Protection Bureau (CFPB) published its last survey in 2015, which mentioned that 26 million or about 11% of American adults are credit invisible. Of these, more than 80% or approximately 7.5 million American adults of ages 18 or 19 years are credit invisible or do not have a credit score. Less than 40% of older consumers of ages 20 to 24 years are credit invisible or do not have a credit score.

Although the above-mentioned reports provided a lot of relevant information, it did not directly answer the request. Next, we looked through Statista to see if it could provide any direct statistics related to the total number of recent college graduates who do not have a credit score and do not have access to a parent's credit line in the US. Although Statista provided statistics around credit cards in the US, it did not mention anything about the total number of recent college graduates who do not have a credit score and do not have access to a parent's credit line in the US.

Next, we looked through various media reports and industry-specific websites such as Lexington Law, CNBC, Forbes, Vox, WalletHub, Credit.com, Creditcards.com, Credit Karma, Value Penguin, Business Insider, and others. Many of these sources talked about student debt, the average credit score, and the best credit card for college students who need to build a credit history. A recent article from Value Penguin revealed that recent college graduates or 30% of adults between the age of 20 and 24 years have no credit score and are called "credit invisible."

Finally, in absence of a direct figure for the number of college graduates who do not have a credit score in the US and the total number who do not have access to a parent's credit line, we decided to estimate the figure. So, we tried to determine the total number of recent college graduates. We searched through government databases such as the United States Bureau of Labor Statistics and the National Center for Education Statistics (NCES). Through this search, we were able to find the number of recent college graduates. Please note that in order to provide a comprehensive report, we have used data from previous years, such as from 2015, 2016, and 2017.

Total number of recent college graduates without a credit score

As recently published by CNBC, 2019, "one in every 10 U.S. adults is credit invisible" or these individuals have no credit score/credit history. Another recent article from Card Rates also mentioned that "while 58% of graduates have at least one credit card, many students have yet to even establish credit."

Based on a survey conducted by Experian on soon to be college graduates (in just 3 to 4 months), "58% of soon to be college grads have a credit card" leaving 42% of soon to be college graduates who do not have a credit card. Most of the college graduates are between the ages of 21 to 24 years.

According to the Bankrate study conducted on 18 to 29-year-olds, 33% of this population is "under–banked and 63% do not have credit cards." Based on the CFPB report, most of the young adults are 'credit invisible' due to the lack of a credit score/credit history. Because they have no credit history, they remain unscorable. Young adults of ages 18 to 29 years represent "a large and relatively untapped market."

The latest research report by the CFPB (Consumer Financial Protection Bureau’s Office of Research) that was released in 2015, revealed that about 188.6 million Americans have a credit history at one of the NCRAs. This represents over 80% of the adult American population. Additionally, 19.4 million Americans have a credit history that cannot be scored, representing 8.3% of the adult population. This includes 9.9 million consumers who have credit records that are insufficiently unscored while 9.6 million consumers who are stale unscored. Apart from this, 26 million or about 11% of adult Americans are credit invisible. Of these, more than 80% or approximately 7.5 million American adults of ages 18 or 19 years are credit invisible or do not have a credit score. However, this percentage declines with the age of consumers. Less than 40% of older consumers of ages 20 to 24 years are credit invisible or do not have a credit score.

METHOD 1:

Average recent young college graduates ages 21–24 years and according to the latest data obtained from the National Center for Education Statistics, 2018, the total number of recent college graduates is 1.9 million.

From the above, if we assume that the same percentage (40%) is applicable for recent college graduates (as they also fall in the age group of 20 to 24 years), the total number of recent college graduates without a credit score would be 760,000 (40% of 1.9 million).

METHOD 2:

A recently published article from Value Penguin, 2019, revealed that recent college graduates or 30% of adults between the age of 20 and 24 years have no credit score and are called "credit invisible."

As the total number of recent college graduates in the US (2019) is 1.9 million, the estimated percentage of college graduates who do not have a credit score would be about 570,000 (30% of 1.9 million).

Therefore, the estimated total number of recent college graduates who do not have a credit score ranges between 30% to 40% or between 570,000 to 760,000.

Based on a 2016 survey, about 70% of college students have one or more credit cards. So, the above numbers seem to be correct for the number of recent college graduates who do not have a credit score.

College Graduates without access to a parent’s credit line or WHO are an "authorized user" on their parent's credit card account

About 12% of college graduates "obtain a credit card as an authorized user on parent's card." So, these college graduates would have access to their parent's credit line. Also, "11% of teens" between 12 and 19 years have their own credit card while "an additional 10% have access to a parent’s credit card."

According to the Credit Card Act of 2009, students below the age of 21 years can only have a credit card "if they earn their own income, have a cosigner (usually a parent) or are an authorized user on their parents’ card."

Based on a survey conducted by Experian on soon to be college graduates (in just 3 to 4 months), "68% of college grads have needed the support of a recent cosigner." Out of these, 12% of college graduates needed a recent cosigner for a legal agreement for a credit card. So, we have assumed that 12% of college graduates may have taken their parents as a cosigner while applying for a credit card.

As the total number of recent college graduates in the US (2019) is 1.9 million and 12% of college graduates have access to a parent’s credit line or are an authorized user on their parent's credit card account, the remaining 88% (100% — 12%) or 1.672 million college grads (88% of 1.9 million) would not have access to a parent's credit line.

Therefore, 1.672 million recent college graduates would not have access to a parent's credit line.




Sources
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