Millennials Getting Credit Score Help from Baby Boomers

Millennial daughter, baby boomer mother and grandmother discussing financesMillennials are the new up-and-coming generation in America. The sons and daughters of the baby boomer generation, millennials, are a rather unique bunch. Born in a period of rapid and advanced technological growth, millennials tend to have a different approach to life than their parent’s generation. However, it isn’t just the generational age gap that has led to this major difference. It is also the severe economic conditions millennials were met with when they began entering the job market.

Many millennials came into the adult world during the global financial crisis and found it difficult to survive on their own. Over the past several years, the economic recovery in the nation has been very lopsided, with long-term employment and wage growth performing abysmally over the past decade. Many millennials are facing high property prices, low wages, shaky employment stability and high student debt. This had led many in the financial world to question what role millennials will play in the economy. Even analysts at Goldman Sachs are becoming concerned about the property market. One major trend that analysts are seeing is that millennials are finding it difficult to move out of their parent’s houses.

Some people have offered up explanations for this phenomenon, suggesting that millennials are either lazy or too dependent on their parents. In reality, the real reason for this phenomenon is both the lack of job prospects and little to no credit history. The housing market is still in a weird position, and many millennials have not yet had the chance to build their credit score to an adequate level to be approved for a mortgage. Many millennials are saying this themselves, claiming they attempted to get approved for a mortgage but were denied.

But there may be a solution to this problem. A young financial technology company called Backed is allowing the baby boomer generation to lend their credit scores to younger millennials who lack credit history. The startup uses advanced data analytics to rethink the co-signing process. Millennials can now get a jump start on their credit history by using their parents as backers, while also using Backed’s advanced data analytics to ensure that the loans are safe from default.

Backed is already established in Arkansas, Florida, New Jersey, New York and West Virginia because these states do not require a lender’s license. But the startup plans to expand into even more states soon and has acquired $1.5 million in seed funds so far. Backed said it is currently in talks with federally insured banks in 45 other states to help provide loans in collaboration with Backed. Over the rest of the next few years year, Backed hopes to receive even more funding and to expand to the rest of the United States.

Many young financial technology companies like backed are offering innovative services like this to provide solutions to problems facing our country. Peer-to-peer lending has been a particularly innovative new venture, providing both investment opportunities and less-risky loans to millennials across the nation. “Then we learned about peer-to-peer lending. We really like emerging industries and we wanted to see where there was space for optimization and improving conversion rates,” said Backed cofounder Gilad Woltsovitch. “That is where we came up with idea of parent lending kids their credit score rather than cash. We believe this solution helps both sides, because it allows kids to build a credit history and relieves the financial burden on parents.”

Posted on November 30, 2017 by in Credit Monitoring

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