Recent College Grads

Part
01
of two
Part
01

College Grads Without Credit

It has been estimated that about 589,000 (31%) recent college graduates do not have a credit score. It was also estimated that 1,710,000 recent college graduates do not have access to their parent’s credit line in the United States. A report published by CNBC revealed that 20% of young adults aged between 18 and 22 do not have a credit score.
To determine the total number of recent college graduates who do not have a credit score or have access to a parent’s credit line, we began our search by looking into government databases such as the National Center for Education Statistics (NCES), United States Bureau of Labor Statistics, and The Hill. Through these channels, we were able to find the number of college students who graduated in the years 2017, 2018, and 2019. We then extended our search to include industry-specific websites such as Lexington Law and media websites that published reports on credit scores such as CNBC. An extensive search through these channels provided us with the number of college students with credit loans and those without credit scores. While the direct figure for the number of college graduates who do not have a credit score in the United States was unavailable, we utilized the data obtained to calculate an estimated figure.
We then expanded our search further to include market-specific websites such as Edvisors, Consumer Financial Protection Bureau (CFPB), and College Parent Central to find the number of graduates without parent’s credit line. During our search, we were able to find the number of college students with credit cards along with information pertaining to the Credit Card Act of 2009. We utilized the available data to estimate the number of college students do not have a credit score and do not have access to a parent’s credit line in the United States. Our findings and calculations have been presented below.

College Graduates without a Credit Score

According to the report published by the CFPB, there are over 50 million individuals in the United States without a credit score and over 26 million without a credit history. Currently, nearly 20% of young American adults, aged between 18 and 22 do not have a credit score. Studies have also shown that 19% of the country’s overall population or more specifically, 45% of the American adult population is found to be “credit invisible”. It has been found that 31% of recent college graduates have no student loan or federal debt. This implies that 31% of graduates do not have a credit score.
A report published by the Bureau of Labor and Statistics revealed that there are 1.2 million college students, aged between 20 and 29, graduated during the period 2016 to 2017. It was found that 37% of individuals aged between 25 and 34 own a bachelors degree while 30% of Americans who are aged 55 and above have a 4-year degree. Of those who are college graduates, 55.9% are found to be Asian Americans, 37% are found to be non-Hispanic, 23% are African American, and 16.4% are Hispanic Americans. For the current year, over 1 million college students will graduate with an associate’s degree, 1.9 million American students will obtain their bachelor’s degree, about 780,000 young adults will have a master’s degree, and 182,000 will obtain their Ph.Ds.
Total number of recent college graduates in the United States (2019) = 1.9 million
Percentage of college graduates who do not have a credit score = 31%
Number of recent college graduates who do not have a credit score = Percentage of college graduates who do not have a credit score x Total number of recent college graduates in the United States (2019)
Number of recent college graduates who do not have a credit score = 31% of 1.9 million = 589,000

College Graduates without access to a parent’s credit line

According to an article published by College Parent Central, there are approximately 58% of American graduates who use credit cards and about 30% of college graduates are found to have credit card debt. Based on the Credit Card Act of 2009, college students below the age of 21 are not allowed to own credit cards except when a parent or an adult co-signer attests to their ability to have a credit line. It was found that 10% of co-signer applicants have been approved, implying that only 10% of American college graduates have access to a parent’s credit line.
Total number of recent college graduates in the United States (2019) = 1.9 million
Percentage of college graduates with access to a parent’s credit line = 10%
Number of recent college graduates in the United States who have access to a parent’s credit line = Percentage of college graduates with access to a parent’s credit line x Total number of recent college graduates in the United States (2019)
Number of recent college graduates in the United States who have access to a parent’s credit line = 10% of 1.9 million = 190,000
Total number of recent college graduates in the United States who do not have access to a parent’s credit line = Total number of college graduates — Number of graduates who have access
Total number of recent college graduates in the United States who do not have access to a parent’s credit line = 1.9 million — 190,000 = 1,710,000
Therefore, there are about 1,710,000 college graduates who do not have access to a parent’s credit line.

Part
02
of two
Part
02

College Grads Methods for Securing Credit Cards

Five methods used by college graduates to secure credit cards after school when they have a new job in hand include obtaining secure cards, acquiring store credit cards, applying for credit builder loans, using co-signers, and becoming an authorized user.

METHODOLOGY

To find the required information, we looked through websites that focus on analyzing credit cards such as Card Rates and The Balance. We used information from these websites to find the recommended methods for obtaining credit cards if one has little or no credit history. After searching through credit card websites and review sites, we found that many people do not like involving family and friends in their personal finances. Furthermore, many parents prefer their loved ones building their credit score as opposed to co-signing and making them authorized users. Therefore, graduates are mostly left with the option of obtaining secured cards and store credit cards.

Secured credit cards

The easiest way to get a credit card without a credit history is to go for a secured credit card, which is the safest and most recommended method. Obtaining a secure credit card is recommended for people without credit history. One is required to make a deposit of between $49 and $200 to his or her respective card issuer for security reasons. The deposit is used as collateral before one gets approved. The processing of getting a secured card is safe because it does not involve a third party. Therefore, no one is held responsible in case a card holder defaults payments.

Store Credit Card

Even though store credit cards are limited to buying items from a particular store, they can help a college graduate build a credit history provided that the balance is kept low and paid off quickly. College graduates use this method to build credit history.

Credit Builder Loan

The concept of a credit builder loan is similar to that of a secured credit card. One receives a small loan from a financial institution, which is used to buy a certificate of deposit. Periodical payments are made and after clearing the loan, one is issued with the certificate. Although one has to also pay for interested, taking and clearing the loan helps in building credit.

Co-Signers

College graduates who cannot obtain credit cards can ask employed people with good credit scores to apply on their behalf. In this case, the employed person can monitor the purchases of the graduate and ensure that he or she has responsible financial behavior.

Authorized Users

A person with a credit card account can request to add a graduate to his or her account. By doing so, the graduate can be given a credit card. The account holder is responsible for all the payments and can monitor the credit card transactions of the other person. It is worth mentioning that a good credit history from the authorized user will also benefit the account holder.

Sources
Sources

From Part 02
Quotes
  • "Instead, because most new graduates will have no or limited credit history, new credit card options are going to be similarly limited. But there are a number of quality credit cards designed specifically for credit builders."
Quotes
  • "Our experts have decades of combined experience in the personal finance space and know how to separate the good products from the bad"