Young people and credit

Why are they always rejected?

Shuhang Liu

In the modern financial system, credit is essential to individual financial independence. However, many young people are rejected when they apply for credit cards or loans. What makes it harder for young people to get credit? What are the consequences? And how can we improve young people's access to credit? This article will explore this issue in depth, combining the latest research and policy recommendations.

Lack of credit history is the main reason why young people are rejected for loans. Many young people have never used credit products, and banks and lenders can't find their credit history in the credit scoring system. Lusardi et al. (2010) found that many young people do not understand the importance of credit scores, so they do not take the initiative to establish credit records. Even if they pay their rent or utilities on time, these behaviors are often not recognized by traditional credit scoring systems.

Income instability is also a barrier. Lyons (2004) stated that many college students and recent graduates can only work part-time or short-term contracts, and the income is not stable, and it is difficult to meet the requirements of lending institutions. Norvilitis et al. (2006) found that these young people are more dependent on credit cards, and high debt may reduce loan approval rates. At the same time, student debt is overwhelming. According to the Consumer Financial Protection Bureau (2015), the average student loan for a college graduate in the United States is $35,000. Lenders often consider debt-to-income ratios (DTI), so it is harder for young people with higher debt to get new loans (Robb & Sharpe, 2009).

Credit exclusion can affect young people's financial situation and future development. Many young people choose other ways to borrow money, such as overborrowing on credit cards, after being turned down for loans. But this approach tends to trap them in a cycle of debt (Shim et al., 2010). Xiao et al. (2009) found that long-term dependence on high-cost credit may increase financial stress, lead to anxiety, and even affect mental health. Bair (2025) further explains that a low credit score not only makes it difficult to get a loan, it can also affect renting, mobile phone contracts, and even employment, putting more financial pressure on young people.

To help young people gain easier access to credit, financial institutions, governments and individuals all need to take steps. For example, banks and fintech companies can improve credit scoring systems to make assessments more comprehensive. The World Bank Group (2022) suggests that banks could factor rent, utility bills and savings habits into credit scores. This data can help young people build a credit history faster and improve the likelihood of loan approval.

Financial education is equally important. Lusardi et al. (2010) stated that improving financial knowledge can help young people establish credit records earlier and reduce financial decision-making errors. For example, governments and schools can create credit management training courses and provide more online learning resources to make young people more aware of how to effectively accumulate credit history, thereby improving their credit availability.

Financial institutions can also introduce easier to apply for credit products to help young people better access credit. Hancock et al. (2013) found that low-limit student credit cards can improve credit scores through regular repayment. In addition, the government or banks can provide unsecured small loans, which have low interest rates and low thresholds and are suitable for young people with less credit history. Policymakers can also require banks to accept deposit records or wage earnings as credit assessment criteria, reducing credit restrictions for young people (Robb & Sharpe, 2009).

The government could further introduce the Youth Credit Support Scheme, which provides low-interest loans or guaranteed loans to help young people access finance (Lyons, 2004). The UK's "Help to Buy" scheme has been successful in supporting first-time buyers, while Singapore's state subsidy policy has helped young people build credit histories.

Credit exclusion not only affects personal finances, but also has long-term effects on the economy. Improved credit scoring systems, enhanced financial education, more flexible credit products and government support can all reduce credit barriers for young people and make it easier for them to access financial services. This will not only enhance personal financial independence, but also promote the stable development of the social economy. If financial institutions and policymakers do not act, young people will continue to face barriers in accessing credit, limiting their economic opportunities.

References

Bair, S. (2025) ‘Credit scores are hazardous to your financial health’, Financial Times, 16 January

Consumer Financial Protection Bureau (2015) Financial well-being: The goal of financial education. Washington, DC: Consumer Financial Protection Bureau

Hancock, A.M., Jorgensen, B.L. and Swanson, M.S. (2013) ‘College students and credit card use: The role of parents, work experience, financial knowledge, and credit card attitudes’, Journal of Family and Economic Issues, 34(4), pp. 369–381

Lyons, A.C. (2004) ‘A profile of financially at-risk college students’, Journal of Consumer Affairs, 38(1), pp. 56–80

Lusardi, A., Mitchell, O.S. and Curto, V. (2010) ‘Financial literacy among the young: Evidence and implications for consumer policy’, Journal of Consumer Affairs, 44(2), pp. 358–380

Norvilitis, J.M., Merwin, M.M., Osberg, T.M., Roehling, P.V., Young, P. and Kamas, M.M. (2006) ‘Personality factors, money attitudes, financial knowledge, and credit-card debt in college students’, Journal of Applied Social Psychology, 36(6), pp. 1395–1413

Robb, C.A. and Sharpe, D.L. (2009) ‘Effect of personal financial knowledge on college students’ credit card behavior’, Journal of Financial Counseling and Planning, 20(1), pp. 25– 43

Shim, S., Barber, B.L., Card, N.A., Xiao, J.J. and Serido, J. (2010) ‘Financial socialization of first-year college students: The roles of parents, work, and education’, Journal of Youth and Adolescence, 39(12), pp. 1457–1470

World Bank Group (2022) World Development Report 2022: Finance for an Equitable Recovery. Washington, D.C.: World Bank Group

Xiao, J.J., Tang, C. and Shim, S. (2009) ‘Acting for happiness: Financial behavior and life satisfaction of college students’, Social Indicators Research, 92(1), pp. 53–68.