A recent study from Arizona State University challenges the notion that young adults are 'bad borrowers'.
Adults between the ages 18-21 are less likely to have a serious credit default than older people and are lower risk borrowers, according to the study from ASU’s W.P. Carey School of Business.
Andra Ghent, an assistant professor at the business school, along with researchers from the Federal Reserve Bank of Richmond looked at data gathered after the passing of the Credit Card Accountability and Responsibility and Disclosure Act of 2009.
This act makes it illegal to issue a credit card to a person under the age of 21, unless that person has a cosigner or can prove that they have the means to repay the debt resulting from a credit loan.
Ghent said she wanted to know if the law has been effective in restricting credit to young adults and learn about the people who get credit cards.
“The conclusion is yes, the Credit Card Act was successful in restricting credit to people under the age of 21," she said. "And second, people under the age of 21, we just didn’t see them getting into a lot of financial problems, certainly less financial problems than the rest of the population.”
Ghent said she thinks the people who are getting credit cards at a young age tend to be more financially literate than the general population.
Read the study here