Credit Score and the Disadvantages for Young Adults

Abstract

This paper examines the societal issues that young adults face with traditional credit scoring systems. This includes the problem of credit invisibility and the use of outdated metrics that assess one's financial standing. It analyzes how newer potential earners are disadvantaged by traditional models through the exclusion of non-traditional indicators such as rent, utilities, and even modern digital payments. This covers both the US and South Korea, highlighting the increased credit exposure risks and plummeting credit scores of Korean as well as American youth. This research proposes a solution in three steps: the use of alternative financial data, increasing the transparency of AI systems in credit evaluation, and holistic financial literacy. This will reform the credit system into one that actively encourages the inclusion of young adults, mitigates societal risk, and grants unrestricted access to economic opportunities.