WASHINGTON — Charlie Frohne never wanted a Visa or a MasterCard, afraid of incurring debts he could not repay. But as the 30-year-old searched for a Manhattan apartment, he found landlords treated his lack of a credit history as a liability.
His experience highlights a growing reluctance among young adults to use plastic for everyday purchases. Thirty-nine percent of undergraduates ages 18 to 24 had a credit card in 2012, down from 49 percent in 2010, a Sallie Mae and Ipsos Public Affairs survey found.
And young adults who do have credit cards are carrying smaller balances: a median of $1,600 in 2010, compared with $2,500 in 2001 for under-35 households, according to Federal Reserve data.
The shift, rooted in stricter lending rules and weaker job outlooks since the 2008-2009 recession, has implications for the economy. As people in Frohne’s age group eschew plastic, fewer are building the credit histories that would help them to gain financing for purchases of homes and cars that are critical to economic growth.
‘‘You could say that they’re not going to get mortgages, and that could have dire economic consequences,’’ said Ann Schnare, a mortgage industry consultant who formerly was vice president of housing economics and financial research at Freddie Mac. ‘‘But that assumes a static model. I think that the industry will respond.’’
Credit bureaus and the lending industry are stepping up their search for new ways to bolster credit files, and young people who don’t pay credit card bills often do pay mobile phone bills. As reporting agencies gather data from telephone, rent, and other payments, some scoring models incorporate it to help assess candidates’ creditworthiness.
‘‘If the only way to get credit is to borrow, young people are going to be slower to borrow. It is circular,’’ said Rachel Schneider, senior vice president at the Center for Financial Services Innovation, which grew out of a research project done on behalf of the Ford Foundation in 2002 and strives to help so-called underbanked consumers access stable financing. Leveraging extra data is a way of ‘‘bringing new people in’’ for banks as the economy rebounds, she said. ‘‘It helps them expand the market.’’
Credit card borrowing, one of the drivers of the consumer spending that makes up 70 percent of the US economy, has been shrinking across all age groups since the recession. New York Federal Reserve data show that total credit card debt declined by $25 billion, or 3.6 percent, for the fourth quarter of 2012 from the same period in 2011. Since the fourth quarter of 2007, it has dropped about 19 percent.
The decrease has been marked among consumers younger than 35, a Pew Research analysis released last month found. Credit card use for young people began declining prior to the recession, and between 2007 and 2010 dropped 20 percent, based on the Pew findings. The share of young American households carrying a credit card balance fell to 39 percent in 2010 from 48 percent in 2007.
That could be partly the result of a 2009 law, the Credit Card Accountability Responsibility and Disclosure Act, which made it more difficult for credit card companies to market cards on college campuses, said Brannan Johnston, managing director of Experian’s RentBureau division.
Scarce job opportunities also play a role. Unemployment for those ages 20 to 24 stood at 13.1 percent in February, up from 7.4 percent in February 2007. Joblessness rose to 7.8 percent among 25- to 34-year-olds from 4.8 percent in 2007, based on Labor Department data.
‘‘There’s a greater awareness among young people about the risks of borrowing when job prospects are lower,’’ said Terry Sheehan, at Stone and McCarthy Research in Princeton, N.J.
‘‘Given the trends in credit usage by younger Americans, I think there will be a growing number of Americans who are credit-invisible,’’ said Michael Turner, chief executive of the Policy and Economic Research Council, a Durham, N.C., nonprofit that researches ways to extend credit to those who lack it.
Without histories to inform them, lenders may shy away from young consumers and landlords may deny leases or charge higher security fees, Schnare said.
‘‘You don’t have a credit history and they consider that a bad thing,’’ Frohne said. While no landlords who turned him away cited his thin credit file, Frohne said several ‘‘seemed to frown on it. It’s always a bump in the road.’’
Now, the recovering economy has rekindled interest in capturing previously unreported data to allow credit bureaus and lenders to create more complete consumer credit profiles, even for those who don’t borrow.
‘‘There will definitely be more economic activity,’’ Turner said. ‘‘Those same people who aren’t using credit cards or auto loans or mortgage loans are paying cable or broadband.’’
Data on energy and telecommunications payments can make good gauges of creditworthiness and could allow banks to extend more, safer loans, according to a December 2006 Brookings Institution report.
But it’s unclear what information can be turned over and collected under the Fair Credit Reporting Act, Turner said.
And data such as rental payment histories are tough to collect.
In an effort to overcome that difficulty, Experian, a credit bureau, in 2010 acquired RentBureau, which collects rental payment data in the United States. A partnership announced last month will let renters pay through Northbrook, Ill.-based WilliamPaid LLC’s online system and have payment data added to Experian credit files.
The extra data collected by Experian and the other major credit bureaus, TransUnion Corp. and Equifax Inc., can be counted into credit scores using custom models at the companies. Much of it can also factor into VantageScore Solutions, a generic model introduced by the three companies in 2006.
Still, the practice of counting measures like utility payments isn’t widespread.
Minneapolis-based FICO’s standard credit-scoring model remains the most widely used, and it relies on traditional lines such as credit card and loan history.
The overwhelming majority of credit scores purchased by lenders in the United States are FICO Scores.