A 28-year-old Korean who moved to Seoul in 2017 borrowed 4 million won from a savings bank at an interest rate exceeding 10%. The debt, which accumulated through loans from credit card companies and online banks, grew to 28.5 million won, leading to a defaulter classification. Despite receiving debt adjustment from the Credit Counseling and Recovery Service and attending a government-supported video editing course to find a job, this young Korean is still unable to obtain a credit card or secure most loans.
The number of young adults in their 20s classified as credit risks is rising rapidly. According to the office of Democratic Party of Korea lawmaker Lee Kang-il, 65,887 individuals in their 20s were registered as delinquent borrowers with the Korea Credit Information Services (KCIS) as of July, a 25.3% increase from 52,580 in 2020. This reflects a growing number of young Koreans burdened by debt before fully entering society. A delinquent borrower is someone registered with the KCIS for failing to repay principal or interest for over three months.
The growth rate of credit risks among those in their 20s is significantly higher than in other age groups. While the total number of credit risks increased by about 8%, from 548,730 in 2021 to 592,567 in July this year, the number of 20-somethings with such risks rose by 25.3%, more than three times the overall rate.
Many young people struggling with missed payments do not carry large amounts of debt. Most with over a month of late payments, though not officially classified as credit risks, owe only a few million won. As of July, 73,379 people in their 20s had short-term delinquency records with credit rating agencies. Of these, 88%, or 64,624 individuals, had debts under 10 million won, indicating that 9 out of 10 delinquent young adults are small-scale borrowers.
With limited job prospects and assets, people in their 20s often struggle to borrow from major banks. Many turn to secondary financial institutions, such as credit card companies, which offer easier access to loans but at higher interest rates, putting them at risk of falling into delinquency.
The delinquency rate for revolving credit users under 29 at eight major domestic credit card companies was 2.2% as of last year, according to data from the Financial Supervisory Service obtained by the ruling People Power Party lawmaker Lee Jong-bae’s office on Sept. 9. Among all age groups, only those over 60 had a higher delinquency rate (2.6%) than those in their 20s. Revolving credit allows cardholders to repay just 10% of their balance and carry over the remainder, a feature commonly used by those struggling with immediate payments.
The number of 20-somethings filing for personal rehabilitation in court is also rising annually. Last year, there were 3,278 such cases at the Seoul Bankruptcy Court, a 45% increase from 2,255 cases in 2022 and an 83% rise from 1,787 cases in 2021.
Lee Jung-hee, an economics professor at Chung-Ang University, warned, “Low credit scores early in life can hinder young people’s economic participation and create a vicious cycle for both individuals and society,” adding, “We need more quality jobs and institutional support to help them recover.”
