Your credit score is a powerful number that directly impacts many of your financial moves. The three-digit number is based on the information in your credit report, which is a compilation of your credit history from businesses you’ve had credit accounts with.
One thing that isn’t a factor in your credit score – your age. In fact, beyond requiring that you’re old enough to sign a contract, lenders aren’t able to use your age to determine whether to approve your applications.
Age isn’t a factor in credit scores, but there’s definitely a correlation. There are a few ways that age can indirectly impact credit scores. For example, 15 percent of your credit score is based on the length of time that you’ve been using credit, which is the age of your credit history. The more experience you have with credit, the better, especially if you have a positive credit history. It stands to reason that the older you get, the more experience you have with credit. That experience can give your credit score a boost.
Average Credit Score By Age
Here’s the average credit score by age breakdown, from Time:
- 18-29 years old: 652
- 30-39 years old: 671
- 40-49 years old: 685
- 50-59 years old: 709
- Age 60+: 743
As you can tell, younger consumers, on average have lower credit scores, while older consumers have higher credit scores. For some lenders, a credit score below 660 is considered subprime and would either lead to a denied application or the consumer being approved for less favorable terms.
At 18 years old, consumers are just started out with credit. Possibly getting their first credit cards. It will take at least six months for a credit score to be generated, since that’s the minimum amount of information required for a credit score.
Income, Age & Credit Scores
Income is another age-related factor that could indirectly affect credit scores. Lenders use income to determine whether a person can afford a new debt obligation, but income isn’t factored into credit scores. However, income goes affect a person’s ability to afford their financial obligations.
Average salary also tends to increase with age, which means consumers are better able to afford their bills as they get older and their salary increases.
Having a history of on-time payments can give your credit score a huge lift, since payment history is 35 percent of your credit score.
Note that next year, FICO plans to introduce the UltraFICO score which will use bank information to boost credit scores for consumers who may fall just below the lender’s cutoff.
Age & Level of Debt
Younger people, with lower incomes and less experience with financial obligations, may be more prone to making the kinds of mistakes that lead to lower credit score. Carrying a large amount of debt, for example high student loans, auto loans, and credit card balances, can negatively affect your credit score given that level of debt is 30 percent of your credit score.
Impact of Negative Information
As you get older, your credit score kind of improves on its own as your credit report “cleans” itself. Most negative information only stays on your credit report for seven years. After that, it ages off your credit report and is no longer included on your credit report. Financial mistakes of your youth, no longer plague you as an older, wiser, more financially savvy adult. As long as you can avoid making any new mistakes, your credit score will rebound over time.
Closing Old Accounts or Leave Them Open?
Leaving old accounts on your credit report can be beneficial since they lengthen your credit age. Any negative information associated with open, active accounts will fall off your credit report after seven years, leaving you with an account that shows you have years of experience with credit. If you close an account, it will eventually drop off your credit report. Even positive closed accounts will fall off your credit report after about ten years. At that point, you’ll lose all that positive information that previously boosted your credit score.
Great Credit At Any Age
None of this means you can’t have an excellent credit score as a young adult. If you’re handling your credit obligations well, your credit score will reflect that. Being an authorized user on an older account with a positive payment history can boost your credit score when you’re young.
Similarly, not every older adult has an excellent credit score. Serious credit mistakes, like repossession and foreclosure, can seriously damage your credit score at any age.
BY LATOYA IRBY Updated December 04, 2018 | the balance