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Millennials – Are They Worth the Risk?

Dear Gini,

Our marketing department has run successful campaigns to attract Millennials. Now that we’ve got them in the door we’re thinking about using age as a decision element along with score and others. Do you have any experience with the special handling this group requires?

Seeking Keepers,
Gen Y


Dear Gen Y,

Whether we call them Generation Y, Echo Boomers, Millennials, or some other PC label, banks and financial institutions have been targeting young people for years. Now that you have these youngsters coming through the doors, you better spend some time, money, and effort to design credit scores and strategies to book and keep them.

You’re a little off the mark using age as a decision element. Age is a key element, but you should use it as a population splitter. You’re probably thinking, “Gini, what do you mean by population splitter?” In other words, you actually need to build custom models and strategies that fit the unique characteristics of the Millennial generation.

Here are some interesting facts about our Millennial friends. They use credit less than any other age group1. Believe it or not, over 63 percent do not have a credit card. Does that mean the younger generation is more financially responsible? Nope – it’s more of a reflection of what happened after the Great Recession. American are less reliant on credit cards, and because of the CARD Act of 2009 it’s harder for people under 21 to get a credit card. So, Millennials get used to handling their finances without one. In addition, Millennials’ bureau scores tend to be much lower than the group’s actual risk would suggest.

Expand Characteristics. The only way you can evaluate this group is by expanding (some would say reverting) to characteristics that are not bureau-based. Employment stability, income, and current debt load (don’t forget those pesky student loans) have historically been used to vet younger applicants.

Say Yes. What’s the key to success with Millennials? Find a way to say yes. This generation represents your future. As long as you only grant credit to those who can prove they don’t need it, you’ll never crack this market segment.

Nurture them. I know what you’re thinking, “Gini, are you seriously asking us to throw caution to the wind and risk losses on this group?” Absolutely not. Establish tight usage controls. Start Millennials with smaller credit lines and increase them as you gain experience with them. Just like the rest of your portfolio’s subpopulations, the quality customers will rise to the top. After you weed out the higher risk ones, you should have the basis for a profitable portfolio segment. Then you’re marketing department will have to spend time, money, and effort on squeezing out additional revenues from the Millennials.

Remember this group is your future. Develop models and strategies that balance risk with saying yes and you’ll find yourself with the next generation of profitable customers.

Good luck,



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