Average Credit Scores By Age: How Do you Stand?
The more you know about credit, the better off you'll be. If you know more about credit ratings, you'll find it easier to maintain a good score. One thing you should know is that credit scores by age vary significantly. Those in the same age group are more likely to have scores at a certain level. As a consumer, you might want to explore credit scores by age.
How Credit Scores Differ In Various Age Groups
When you consider credit scores going along with certain age groups, you can see how you're doing. You can see if your credit score is good for your age group. You shouldn't get discouraged if you find that others in your age group have generally higher scores. However, knowing this might help to motivate you. Perhaps your score is low for your age group. In this case, you might want to improve your finances. You might find that your score is high for your age. This helps encourage you to continue the good work.
There is no fixed rule about what the credit rating scale says about an individual of a certain age. However, it's pretty typical that younger people have lower credit scores than older people.
The following is some key data to consider regarding credit scores by age. If your credit score is higher than the average for your age group, you're doing pretty good. Hopefully, your credit score will rise even higher over time. If your score is on the low side, that's ok! You just need to get started with some credit improvement efforts.
Consumers Born Between 1925 And 1945
The consumers who were born between these years tend to have the highest credit scores out there. In fact, the average credit score for this age group is 755. Consumers typically become more financially secure as they age. In many cases, they also tend to become more conservative spenders.
In terms of credit scores by age, consumers in this age group are reliably doing well financially. There are numerous reasons for this. A significant number of these consumers own their own homes. Also, this generation tends to have developed a strong work ethic after living through events like the Great Depression and World War II.
Consumers Born Between 1946 And 1966
Those who were born in these years are known as "Baby Boomers". This age group also has credit scores on average that qualifies as "very good" or better. The average credit score for Baby Boomers is 733. A lot of those in this age group need strong finances because they are retired or about to retire. This generation is also known for a strong work ethic. This generation is also known for being well-informed regarding credit management.
Consumers Born Between 1967 And 1981
When analyzing credit scores by age, you'll see that the average score is a bit lower in this category. The average credit score of those born between 1967 and 1981 is 683. Those born in this time period are still establishing their financial health. Individuals born in the later part of this time period may still be struggling to establish themselves in their careers. They also tend to have been heavily impacted by the 2008 recession.
Consumers Born Between 1982 And 1995
The millennial generation has a credit score that averages slightly lower than the previous generation. The average credit score for this generation is 672. It is natural and expected that millennials would tend to have lower credit scores. This is largely due to the fact that they haven't had as much time to earn a professional salary.
They also haven't had as much time to pay off large assets like homes and vehicles. One advantage that this generation tends to have is that they generally carry less debt on average than those of previous generations.
Consumers Born After 1996
The youngest generation has the lowest average credit score. Generation Z has an average credit score of 660. Although this generation has an average credit score that is only slightly lower than that of millennials, those from this generation are often still living at home. This means that they may have fewer expenses. It remains to be seen how this generation will fair as time goes on. Generation Z does have the benefit of having generally less debt and fewer credit cards than millennials or any other age group.
Now, let’s talk about some credit score basics, to give you a better overall understanding of credit and how it works.
What Credit Scores Are
You first need to understand exactly what a credit score is. Knowing how a credit score works helps you understand credit scores by age. You need to first understand that a credit score scale helps lenders gauge the risk of lending to certain borrowers. This is the essential function of a credit score system.
Lending and borrowing are essential functions in financial markets. Lenders gamble when they give out a loan. However, they gauge a borrower's likelihood of paying back a loan with their credit record. A consumer's credit record shows how reliably he or she has paid back debts in the past.
Credit Bureaus
Credit bureaus are essential when it comes to calculating credit scores. A credit bureau is a company that creditors report to, regarding a consumer's performance. Credit bureaus compile information about consumers. They then provide this information to possible lenders when a consumer applies for a loan.
There are three main credit bureaus in the United States. These are TransUnion, Equifax, and Experian. The scores provided on individual consumers by these credit bureaus can differ slightly. However, credit bureaus generally use the same metrics for calculating scores.
It's a good idea to familiarize yourself with the three main credit bureaus. This helps you to understand how credit works in the US.
TransUnion
TransUnion is a credit bureau that has been in existence since 1968. It is headquartered in Chicago. TransUnion sells credit reports to both consumers and lenders. Like the other bureaus, TransUnion offers a free report to consumers on an annual basis. TransUnion looks at payment history and current debt in calculating scores. TransUnion looks at payment history as the most important part of a score calculation.
In addition to compiling credit reports, TransUnion also offers various additional services. These include fraud detection, identity verification, and background checking services.
Equifax
Equifax is another prominent credit bureau. Equifax is significantly older than TransUnion and was founded way back in the year 1899. The credit scoring model of Equifax is also focused mostly on payment history. Equifax uses a variety of information sources to calculate consumer credit scores. These include public records, the existence of various accounts, and collection items. The length of a consumer's credit history has a fairly small impact of only around 7 percent on Equifax credit scores.
Experian
Experian is the youngest credit bureau. It was founded relatively recently in 1996. This credit bureau is headquartered overseas in Ireland. Experian is a multinational credit reporting bureau. However, the company is a subsidiary of the American company TRW Inc.
Types Of Credit Scores
Probably the credit score that is most commonly used and referenced is the FICO score. The FICO credit score has been around since 1989. However, there is another credit score called the VantageScore. There are other types of credit score out there, but these two are the most common.
FICO Score
An individual's FICO score can range from 300 to 850. A consumer with a FICO score above 720 has excellent credit. Those with a credit score of between 690 and 719 have a good score. The fair range for this score is between 630 and 689. A credit score of 629 or less is bad.
Generally, all three credit bureaus calculate a consumer FICO score in the same way. The main factors are payment history, utilization of credit, account types, and new applications.
VantageScore
Originally, the VantageScore credit scoring system ranged from 501 to 990. However, currently, VantageScore uses the same 300 to 850 range that FICO uses. On the VantageScore scale, an individual usually needs to have a score of at least 700 to qualify as having good credit.
How Credit Scores Work
At this point, you probably want to learn more about how credit scores are calculated. Understanding this will help you understand credit scores by age. When you have a credit card or loan, your creditor reports to the credit bureaus. They report both positive and negative information to the credit bureaus.
If you make a payment on time, it looks good for you. If you pay off your credit card balance entirely, it could boost your score. On the other hand, you'll get a negative mark on your report if a payment is late. Also, the creditor will notify the credit bureaus if your account defaults. Bankruptcy is one of the worst events regarding your credit score.
Find Out Your Credit Score
Nowadays, it's easier than ever to find out what your credit score is. All of the credit bureaus give out a free credit report check on an annual basis. Also, there are a lot of companies offering credit tracking services. You can consult various websites to check your score for free whenever you want. This makes it highly convenient to evaluate data regarding credit scores by age.
You can check your own credit report without negatively impacting your credit. If you've never taken advantage of free credit scores online, now's the time to do it. You need to know what your credit score is to gauge your financial health.
Things That Impact Your Credit Score
Before you check your credit report, you may be able to get an idea of what your score is. You can do this by learning what factors impact credit. It's essential to know which factors influence a credit score. You need to know what determines your credit score so that you can improve.
Learn more about the things that impact credit score to understand credit scores by age. The following are the four factors that are most significant regarding credit score calculations.
Payment History
The number one factor regarding a credit score is payment history. In fact, this factor makes up for over a third of a credit score ranking. If you want to compare better with others regarding credit scores by age, the number one thing to do is start making payments on time.
A few late payments here or there might not harm your credit score too significantly. However, payments that are completely missed could be severely damaging. If you have defaults on any accounts, you're not likely to have a decent score.
It can be hard to make payments if you're struggling financially. The best thing to do if you're struggling with payments is to pay off debt and stop using credit. It may take discipline, but it's the best way to salvage your score.
Debt-to-Credit Ratio
Your debt-to-credit ratio is almost as significant a factor as your payment history. This ratio refers to how much available credit you have compared with how much you owe. If all your credit cards are maxed out, your debt-to-credit ratio won't look good.
At the same time, debt-to-credit ratio can be fixed quickly. You could fix it by making large payments on your credit accounts. If you have funds available for credit improvement, this might be easy for you. It might be worthwhile to put savings toward paying credit down. This is especially true if you need to borrow.
Combination of Account Types
Having a variety of account types can improve your credit. If you have only credit cards, it might not look good. However, if you have an auto loan, credit cards, and a mortgage, you have a more well-rounded credit profile. Consider taking out a different loan type to improve your account diversity. This is a good way to improve your credit profile over time.
Length of Time with Credit
The longer you've been reliably borrowing, the better off you'll be. Credit bureaus will consider the lifespan of your accounts. If you've had the same credit card for fifteen years, it's going to look good for you. However, if you've only had a credit card for a few months, your credit score may be low.
Unfortunately, the only thing you can do is wait if length of history is keeping your score down. Just focus on staying on top of your finances and paying bills on time until your score starts to rise.
Establishing Credit
Those who have never established credit might at first struggle. It can be impossible to take out a loan with no credit history. However, there's plenty you can do to get started. Those with no history can usually be approved for a credit card with a low limit. If you cannot even be approved for a low limit credit card, you can get a secured credit card. A secured credit card requires you to provide a security deposit. Although in essence a secured card functions much like a debit account, this type of card does allow you to establish credit.
Final Thoughts
You now are aware of where you stand in your age group regarding your credit score. Hopefully, your credit score is on par with others your age. If it's not, there are plenty of opportunities to make improvements. Now is the time to get started. You can improve your credit in many ways.
It's important to realize the negative consequences of poor credit. You will struggle to take out loans or even get job offers. It's especially bad if your credit score is worse than that of average consumers your age. Consumers with credit that's average or better for their age will get the best loan terms. In fact, you might struggle to get approved for loans at all.
Develop a plan to improve your credit today. There are many things you can do. The important thing is to keep up with your payments. Perhaps you can take out a convenient loan to consolidate your debt. You should also pay off as much debt as you can. You may be surprised at how much this drives your score up. Be resourceful to find the best solution. It's time to turn around your credit situation and start flourishing financially.