Credit Risk Outlook For Gen Z and Milennials - Experian

Credit outlook
for Millennials
and Generation Z
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Introducing:
Michele Raneri Crissy Wallace

Experian Experian
© 2018 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc.
Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any
form or manner without the prior written permission of Experian. Experian Public.
Defining Millennials and Gen Z
#experian
3 © 2018 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Generations are based on date of birth,
we will be focused on the youngest groupings
Gen Z Gen Y Gen X Boomer Silent
Younger:
Age 22-28 Age 72 or
Age 18-21 Age 36-50 Age 51-71
Older: older
Age 29-35
Focus area
The US census showing the population by age
and gender
Gen Z* Millennials Gen X Baby Boomers Silent

YY OY
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
100+
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
44
46
48
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
Male % of Population Female % of Population
* Gen Z marketable 18-21 = 5% U.S. Population

Source: Census (2016)
While they are both younger, there are still many
differences in the generations
Gen Z aka Gen Z Gen Y

Gen Y aka
Centennial Millennial
Over 19% of US – Mainly children
28% of US, with 5% over 18 –
Younger: of older Gen X and Boomers
Mainly children of Gen X
Age 22-28
Age 18-21 • Digital-savvy
 Digital-centric Older: • Raised on the web
 Raised on social web Age 29-35 • Communicate with text
 Communicate with images
• Share things
 Create things
• Luxury shoppers
 Frugal shoppers
Study from www.Randstad.ca

Today we will be sharing a lot of facts about the
younger generation
Bankcard Mortgage
Personal Alternative
loans data
Credit trends
of younger consumers
#experian
VantageScore® 3.0
Model overview
• Predicts risk of borrower

– Likelihood of future serious A = Super-prime 781–850
delinquencies
(90 days later or greater)
B = Prime 661–780
– Any type of account
• 24-month performance C =Near prime 601–660
• Score range of 300–850

D = Sub-prime 500–600
– Higher scores represent
a lower likelihood of risk F = Deep sub-prime 300–499
– Lower scores are
higher risk
As consumers age, they typically become
more prime
VantageScore® breaks within each generation
100%
80%
Percent of consumers
Deep Subprime
60%
Subprime
Near Prime
40% Prime
Super Prime
20%
0%
Gen Z Gen YY Gen OY Gen X Boomer Silent
Looking at the averages helps to demonstrate this
Average VantageScore® by generation

800
764
750 727
700 665
679 US average
652 = 677
650 636
600
550
Personal loan trends
Personal loan originations are dominated by Boomers
and Gen X, but Millennials are joining in
Dollars of newly originated personal loans
45%
4Q14 4Q15 39%
40% Gen X Boomer
Percent of new dollars originated
4Q16 4Q17
Gen X and
35% 34%
Boomer lead
30% new balances
25%
21%
20%
15%
Age 36-50 Age 51-71
10%
5%
5%
1%
0%
Consumer personal loan balances are increasing,
including younger generations
Personal loan balances Change 2011-2017

$450
$400
Since
$350 Gen Z +57% 2014
$300 Gen Y +40%

Millions
$250
Gen X +35%
$200
$150
Boomer +48%
$100 Silent +36%
$50
$-
4Q11 4Q14 4Q17
Personal loan delinquencies are trending down overall,
but younger people still over US average
As of 4Q17 Percent of balances 90-180 DPD
6%
US 1.32% 5%
Gen Z 2.47% 4%
Gen YY 2.08%
3%
Gen OY 1.51%
Gen X 1.43% 2%
Boomer 1.08% 1%
Silent 1.22%
0%
Gen Z Gen YY Gen OY Gen X Boomer Silent US Avg
Drilling down, fintech as a subset of personal loans,
younger people are engaged as well
Traditional loans Fintech loans

1% Gen Z 3% 1%
8%
22% Gen Y 26%
29%
37% Gen X
32% Boomer 41%

Silent
Boomers for Gen X for

Traditional Fintech
with 37% with 41%
Data based on number of loans August 2017,

not balances as previously shown
Younger generations personal loan behaviors differ
FinTech vs. Vantage Average

90+
traditional by Score® loan
(new PL)
generation (new PL) amount
GEN Y GEN Z
• Similar
• Similar
VantageScore®
VantageScore®
Gen Traditional 642 $6k 5.2%
• Higher
• Similar loan
traditional loan
Y Fintech 639 $6k 4.5%
amounts
amounts
• Higher bad
• Much higher
rates on
bad rates on
Gen Traditional 631 $3k 8.5% traditional
traditional
• More Fintech
Z • More Fintech
loans
Fintech 636 $1k 5.8% loans
Bankcard trends
#experian
Bankcard originations are becoming evident
for the younger people, older still largest percent
Dollars of newly originated bankcards
45%
4Q14 4Q15 4Q16 4Q17
41% Boomer
40%
Baby boomers
35% still leading

30% 29%
25%
20%
20%
15% Age 51-71

10% 9%
5%
1%
0%
Consumer bankcard balances are steadily increasing
across all generations
Bankcard balances Change 2011-2017
$1,000
$900
Since
$800 Gen Z +55% 2014
$700
Gen Y +28%
Millions
$600
$500
Gen X +10%
$400
$300 Boomer +22%
$200
Silent +57%
$100
$-
4Q11 4Q14 4Q17
Bankcard delinquencies for younger people
are higher than the US average
5.0%
4.5%
US 1.54%
4.0%
Gen Z 2.96% 3.5%
Gen YY 2.33% 3.0%
2.5%
Gen OY 2.18%
2.0%
Gen X 1.66% 1.5%
Boomer 1.14% 1.0%
Silent 1.75% 0.5%
0.0%
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Gen Z Gen YY Gen OY Gen X Boomer Silent US Avg
Mortgage trends
Younger people are beginning to originate mortgages
Dollars of newly originated mortgages

45% Gen X
40% 4Q14 4Q15 38%
Gen X originating the

4Q16 4Q17 34% most, but younger
35%
people are coming into
30% the market
25% 23% 23% of new dollars
originated in mortgage
20% were tied to Millennials
15%
Age 36-50
10%
5%
5%
0.2%
0%
Consumer mortgage balances are increasing
across all generations
Mortgage balances Change 2011-2017
$12
Since
$10 Gen Z +48% 2014
$8
Gen Y +2%
Billions
Gen X - 4%
$6
Boomer +11%
$4
Silent +56%
$2
$-
4Q11 4Q14 4Q17
Mortgage delinquencies are low for young people,
mortgages are not yet widespread
6%
US 0.94% 5%
Gen Z* 0.00% 4%
Gen YY 0.47%
3%
Gen OY 0.62%
2%
Gen X 1.03%
Boomer 0.93% 1%
Silent 1.18% 0%
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
*Removed Gen Z due to sample size Gen YY Gen OY Gen X Boomer Silent US Avg
Millennials are entering the mortgage market
Gen OY
w/ mortgage
13% Gen YY
Only 15% no mortgage
35%
of Millennials have a mortgage on
the credit file, vs. 25% overall Gen OY
no mortgage
50%
Gen YY
w/ mortgage
2%
Millennials with mortgages are heaviest in South and
West regions
Millennials by region
South 23% 4%
West 19% 3%
Midwest 15% 4%
Mid Atlantic 13% 2%
Southwest 11% 2%
New England 4% 1%
0% 5% 10% 15% 20% 25% 30%

No Mortgage Mortgage on File
77% of millennials with mortgage are prime
or better
Current VantageScore® for Millennials
Millennials with mortgage Millennials without mortgage

60% 56% 60%
50% 50%
40% 40%
34% 33%
30% 30%
21%
20% 20% 15%
13%
10%
10% 7% 10% 5%
1% 3%
0%
0% 0%
Super Prime Prime Near prime Subprime Deep Unscoreable Super Prime Prime Near prime Subprime Deep Unscoreable
Subprime Subprime
77% 39%
There is a significant difference between Millennials
with a mortgage and those without
Total
Average ® Total
Age VantageScore number Income DTI
metrics debt
of trades
X No mortgage 28 623 8 $19k $33k 11%
Have mortgage 31 716 16 $225k $64k 37%
Young people and
alternative finance
#experian
Defining alternative credit data Alternative Credit Data?
Traditional credit data Alternative credit data

Data assembled and managed in the Data that are not “traditional.” We use
core credit files of the nationwide “alternative” in a descriptive rather than
consumer reporting agencies, which normative sense and recognize there
includes: may not be an easily definable line
• tradeline information (including between traditional and alternative data.
certain loan or credit limit
information, debt repayment history, Examples include: Focus area
and account status)
• Alternative financial service data
• credit inquiries (short-term / payday loan, rent to
• information from public records own)
relating to bankruptcies. • Rental payments
It also refers to data customarily • Asset ownership
provided by consumers as part of • Full file public records
applications for credit, such as income • Consumer permissioned data
or length of time in residence and
employment.
All information that is FCRA compliant
Younger people make up one third all alternative
finance consumers
Missing
Alternative finance consumers
Silent 1% Gen Z — 1%
3%
Missing 1%
Gen YY
14% Gen Z 1%
Gen YY 14% 34%
Boomer
26% Gen OY 19%
Gen OY
19% Gen X 36%
Boomer 26%
Average age Silent 3%
US: 52 Gen X
Clarity: 42 36%
Young people across the full credit spectrum use
alternative finance
Super Prime Prime Near Prime Subprime Deep Subprime
11% 6%
20% 19% 17%
23%
37%
44%
44% 50%
52%
50%
22%
20%
22% 17% 24%
14% 15%
19%
13% 14%
13% 13% 11%
2% 3% 6%

% file 1% 14% 19% 36% 26% 3%
Opportunities with Millennials and Gen Z in the credit
market
Personal loan:
Younger people prefer
online/Fintech
Bankcard:
Growing balances, watch
bad rate
Mortgage:
85% of Millennials do not yet
have a mortgage
Alternative finance:
Over 1/3 of young people use
alt finance
Q&A
Michele Raneri Crissy Wallace

Experian Experian
#experian
©2017 Experian Information Solutions, Inc. All rights reserved. Experian and the Experian marks used herein are trademarks
or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the
trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any
form or manner without the prior written permission of Experian.
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Credit outlook

Michele Raneri Crissy Wallace

Gen Z Gen Y Gen X Boomer Silent

Gen Z* Millennials Gen X Baby Boomers Silent

* Gen Z marketable 18-21 = 5% U.S. Population

Gen Z aka Gen Z Gen Y

Study from www.Randstad.ca

• Predicts risk of borrower

• Score range of 300–850

Average VantageScore® by generation

Personal loan balances Change 2011-2017

$300 Gen Y +40%

Gen Z Gen Y Gen X Boomer Silent

Gen Z Gen YY Gen OY Gen X Boomer Silent US Avg

Traditional loans Fintech loans

32% Boomer 41%

Boomers for Gen X for

Data based on number of loans August 2017,

FinTech vs. Vantage Average

35% still leading

15% Age 51-71

Gen Z Gen Y Gen X Boomer Silent

Gen YY 2.33% 3.0%

Boomer 1.14% 1.0%

Silent 1.75% 0.5%

Dollars of newly originated mortgages

Gen X originating the

Gen Z Gen Y Gen X Boomer Silent

Only 15% no mortgage

Mid Atlantic 13% 2%

0% 5% 10% 15% 20% 25% 30%

Millennials with mortgage Millennials without mortgage

X No mortgage 28 623 8 $19k $33k 11%

Have mortgage 31 716 16 $225k $64k 37%

Traditional credit data Alternative credit data

Gen Z Gen YY Gen OY Gen X Boomer Silent

Michele Raneri Crissy Wallace

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