It’s no secret that Millennials are a unique demographic. They function differently in the workplace, have unique interests, and even have some different rules for relocation.  Basically, Generation Y is slowly figuring out life post recession; juggling their financial, professional, and personal lives to better their overall future (okay, maybe that’s not so unique).

Regardless, it’s no surprise that Generation Y has unconventional means when it comes to dealing with building credit. While many are struggling to pay off credit card debt, most Millennials are struggling with their decision not to use credit cards at all.

In fact, 63% of Millennials report that they do not own credit cards: a striking figure when considering that Baby Boomers average 2.6 credit cards per person. This fact should come as even more of a surprise when one considers the effects a lack of credit diversity on a credit score, something that doesn’t seem to deter Gen Y from credit card shyness. So, why exactly are Millennials avoiding plastic in the first place? 

Millennials distrust the idea of debt.

More than anything else, Millennials reject the idea of being tied down to large amounts of unnecessary debt. With nearly 40% of U.S. citizens under 40 report having student loan debt, it’s no wonder Gen Y is reluctant to take on more debt. Ballooning student loans, high interest rates, and growing up in a recession are all contributing factors to their credit card defiance. Simply put, Millennials are reluctant to use money they may not have on frivolous purchases. Millennials fear debt, choosing instead to use debit cards for day to day purchases. Doing so lessens the chance of living beyond their means, adding to their current debt, and subsequently, will create a lack of credit diversity.

They don’t understand credit scores.

Alongside their distrust of debt, Millennials severely lack an understanding of how credit works. In fact, it’s been proven that they know less about building credit than any other generation, adding to the declining use of credit cards. Without the knowledge of the effect of diversity on a credit report, consumers are much less likely to use alternate forms of credit plain and simple. Millennials hold onto the idea that a small amount of debt is wholly negative, despite the fact that credit scores are essentially based on positive repaying habits. When one considers their thinking, it’s no surprise they steer clear of credit cards. Millennials need to arm themselves with better knowledge of how credit actually works in order to better their financial stability. If used properly, credit cards are a great way to actually build and maintain a great credit score.

Millennials don’t always spend responsibly.

For many, their experience with using credit cards ended in financial disaster; failing to pay a bill off in full the following month. Only 40% of citizens ages 18-29 pay off their credit card debt in full, adding to another reason why Millennials are less likely to use credit. Whether it’s due to financial inability or mere forgetfulness, Gen Y’s failure to repay significantly affects their credit card spending. One negative past experience can certainly affect their attitude towards credit cards, but it certainly shouldn’t act as an end all. Learning to use a card responsibly and pay on time seems to be a difficult task, but one that’s worthwhile. 

What Can Millennials Do To Better Their Credit?

While there’s certainly thousands of articles, blog posts, and books that detail how to better credit, the same solid set of advice can be found in each one. In fact, there are a few simple steps that can be taken by Millennials (or any other generation for that matter) to better their relationship not only with credit cards, but with their credit score in general.

• Know what goes into credit scores. Keep up to date, not only with your report, but learn what information is compiled to create your credit score in the first place. Knowing this information will help you form better financial decisions.

• Make timely monthly payments. Whether you’re paying rent or bills, it’s vital to pay everything on time, in full each month. If you tend to forget, set up digital or physical reminders.

• Choose the right credit card. Do your research and find out what credit card is best for you personally. Usually, secured credit cards are excellent choices for those who are in the midst of building good credit.

• Spend wisely. Use your credit card on essentials like bills or even groceries, and be careful about spending. Never spend more than what you can repay in the following month and don’t use the card frivolously.

Though it may take some time for Millennials to buy into credit card usage, it’s not impossible to change spending habits. So, while many may fail to see credit cards as a necessity, it’s important to realize their thinking. Millennials aren’t willing to risk their hard earned income on frivolity, with which they associate credit card spending. Unfortunately, a lack of credit card usage isn’t always a positive. It can lead to a lack of credit diversity on a credit score, thus making it harder to take out loans for either homes or automobiles. So what can be done? Millennials can better educate themselves on credit reports, the importance of diversity, responsible spending, and the overall benefit credit cards can have on their finances.