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TH E M R EP O RT | 19 FEATURE Millennials Have a Credit Problem Low credit scores and high student debt are two major obstacles millennials face when applying for a mortgage, but this hopeful generation still dreams of homeownership . . . and some are achieving that dream. By Chad Jampedro F or all the mileage the housing industry gained in the last year, millennials' financial woes continue to have many young folks tossing their homebuying dreams into the backseat. It's an exasperating case of Catch-22: With more job pros- pects on the horizon, increasing wages, and historically low-interest rates carrying into the new year, homeownership should be more attainable than ever. But faced with more than $1.2 trillion in stu - dent loans, high living costs, and even higher rental rates, many mil- lennials are barely living paycheck- to-paycheck. Putting away enough money for a down payment scarcely fits into the equation. And there's one other roadblock keeping this group on the fringes of the housing market: millennials have a credit problem. Millennials have the lowest aver - age credit score of any generation at 625, with nearly one-third with credit scores sinking below 579, according to NerdWallet, a personal finance website. That's even lower than the FHA Loan program, which generally requires a down payment of just 3.5 percent with a credit score of at least 640. Millennials may be struggling with credit, but they are not alone in the rue. The average U.S. credit score is just 687, well under the 740 score mortgage lenders recommend to consumers looking to take advantage of the lowest interest rates. The average FICO score for approved loans slid to 723 in September 2015—a number not seen since August 2011. NerdWallet reports the average U.S. household holds more than $129,579 in debt, with roughly $15,355 of that on credit cards. Assuming an average of 18 percent, credit card debt costs consumers an average of $2,630 a year—a nice chunk of change if only wannabe buyers could put it toward saving for a down payment. The rise of credit management programs may be making that possible. As Americans increasingly turn to apps such as Mint.com, CreditKarma, SmartCredit, and other proprietary credit management programs, to monitor their credit, mortgage lenders may see more applicants—and many are finding ways to get in on the action. Rose-colored Glasses T o get behind the credit management movement, it's important to understand the current credit climate. For millennials, the lack of credit is as psychological as it is financial, says Sean McQuay, credit expert at NerdWallet. Many millennials mistakenly believe if they pay all their bills on time, they are financially in the clear. Others simply withdraw from checking their bank balances and credit reports in fear. In fact, nearly one-third of this group hasn't even bothered to apply for a credit card, says McQuay. "Millennials have been pro - foundly affected by the financial crisis," he explains. "So, the horror story became that credit cards led to bankruptcy. We've grown up with Uber, so [the attitude is] 'I don't need to buy a car.' 'I'm rent - ing, so I don't need to buy a house.' And 'Since, I'm not buying a house, I don't need to build credit.' They don't have a history with credit." Without sufficient credit, the opportunity to secure a mortgage remains perpetually out of reach, a fact that has thousands of disen - chanted would-be buyers opting out of homeownership, altogether. Last year's housing gains were largely driven by older, repeat buyers. In fact, the National Association of Realtors reported that the share of first-time buyers dropped to an all-time low at just 32 percent, its lowest point in nearly three decades. That being said, millennials still make up the largest share of first-time buyers. Considering that nearly 76 percent of millennials rank homeownership as "extremely or very important," according to a TD Bank Renter Survey, and nearly 86 percent of people consider homeownership vital to the American Dream, the credit problem presents an obvious rift. To increase the number of first-time homebuyers, Americans must first remove their rose- colored glasses when it comes to their credit. "Consumers vastly underestimate or underreport how much debt