Your credit score number directly impacts your financial dealings. It is a three-digit number based on the information present in your credit report, which holds your credit history from all the businesses where you have credit accounts.
Research shows that the credit score rises with age. Also, an average credit score is impacted by state and income. But that doesn’t mean only old age, good income, and better location will increase credit score. You can build an excellent credit score at any age, location or income level.
According to credit reporting company Experian, the average FICO credit score rose to 711, calculated using the FICO scoring model. Therefore, a higher score is better. People with good credit rates get a better interest rate, have credit cards with better perks and lower interest rates, and even pay less for insurance.
Let’s further explore FICO credit score by age:
Average Credit Score by Age
When FICO calculates average credit score, it does consider the age factor but not the way you might be expecting. The age itself is not used in calculating credit scores, but the age of your account is. The older may have higher credit scores than younger ones due to extensive borrowing history.
As a result, different age groups have varying averages.
In 2019, according to calculations based on the FICO 8 score by Experian, Gen Z adults (18-23 years old) had the lowest average score of 667, while consumers in the 60s had a higher credit score at 731.
In 2020, Gen Z adults (18-23 years old) had the lowest average score of 674, while consumers in the oldest generation (age 75 and older) had a higher credit score at 758.
Average FICO 8 Score by Generation |
||
|---|---|---|
| Generation | 2019 | 2020 |
| Generation Z (ages 18-23) | 667 – Fair | 674 – Good |
| Millennials (24-39) | 668 – Fair | 680 – Good |
| Generation X (40-55) | 688 – Good | 699 – Good |
| Baby boomers (56-74) | 731 – Good | 736 – Good |
| Silent generation (75+) | 757 – Very Good | 758 – Very Good |
It is clear that young consumers have lower credit scores and older consumers have higher credit scores.
Credit Score Categories
According to the FICO model, credit scores fall into five categories:
Very poor: 300-579
Poor: 580-669
Fair: 601-660
Good: 670-739
Very good: 740-799
Exceptional: 800-850
Typically, if the credit score is less than 670, lenders deny the application or approve the application with minimal favorable terms.
How Is Credit Score Calculated?
Various scoring models exist, but the most commonly used credit score across most lenders and trusted by credit reporting agencies is FICO 8 Score.
FICO score ranges from 300 to 850 and considers the following five variables. You will see how age plays an essential role in these five variables while calculating the FICO score:
Payment History (35%)
Payment history has 35% weightage in scoring. The older the account, the more payments it has made that increases the score. However, it is necessary that those payments were made on time to increase the score; else, late payments will decrease the score. Consequently, older consumers will have a longer account history that shows the importance of age.
Credit Utilization (30%)
Credit utilization has a 30% weightage in the final scoring. It refers to the amount of balance you are using from your available credit at a given time.
With age, income grows, affecting how high the credit limit you receive. Lower credit utilization ratio will positively impact the credit score.
Length of Credit History (15%)
With time, account age increases. If you keep the oldest accounts, they will be calculated into the average account age. Length of credit history weighs 15% of total weightage.
New Credit Inquiries (10%)
If you open a new account several times in the last two years, it will ding your account. That’s because lenders start a hard inquiry in your account, which can lessen your score.
If you are an older consumer and have established all of the desired accounts, you will less likely face a hard inquiry. Although it is only 10%, it can impact total scoring.
Credit Mix (10%)
Credit mix weighs 10% of the total. It will be another weighing point in scoring if you can manage a combination of credit types (credit card, mortgage or auto loan). They want to check that you can responsibly control various kinds of debts at a time.
So, a young consumer might only have a credit card account, while a 40-year-old might have used car loans, mortgage, credit card loans and personal loans. The more opportunities you have availed related to credit types, the more it will contribute to total scoring.
Bottom Line
The variables above can improve your credit score if you pay your debts consistently. Over time, people mature and show greater responsibility while handling their money. This consistency speaks for why credit scores increase with age. It shows how responsible you were throughout the years and how you managed your debts.
On the other hand, if you do not show responsibility and make mistakes, your credit score will drop, and you need more time to recover from credit mistakes. Therefore, you must keep good credit habits and increase your credit score.