Report: Young Borrowers More Responsible Than Older Borrowers

Published November 5, 2013

The common perception is that young adults are not financially responsible, mainly because they lack experience in dealing with money. But a recent study from Arizona State University suggests that college-aged credit card users are actually more responsible than middle-aged borrowers.

The study showed cardholders between the ages of 18 and 25 are the least likely to default on their credit cards, and they are most likely to develop strong credit profiles in the future.

The study found “young borrowers are the least experienced financially and, conventionally, thought to be most prone to financial mistakes. Our results challenge the notion that young borrowers are bad borrowers.”

Challenge to Credit CARD Act

This information challenges a portion of the Credit CARD Act of 2009, which prohibits applicants under the age of 21 from getting a credit card without a cosigner or proof of independent income. The study asserts, “We find no evidence that entry into the credit card market before age 21 increases the risk of financial problems later in individuals’ twenties.”

Furthermore, the study indicates there is a strong relationship between early credit card use and mortgage loans, meaning that young borrowers are more likely to own a home at a young age. Many college-aged cardholders use credit cards to build their credit, so they may access homeownership in their early 20s. Delaying the use of credit cards may push those individuals further behind in their plans.

Natalie Rutledge ([email protected]) writes for Used with permission.