When it comes to money, millennials are different from previous generations in several ways, one of which is that they always want to increase their credit ratings.
In 2020, the average FICO score for all the age groups in the United States increased to a new high of 710. However, the average score increased 11 points among Americans aged 24 to 39, the most of my group. Gen Xers, who are between the ages of 40 and 55, were just one point short of a ten-point increase in the average score.
Average FICO Score by Age
In some ways, FICO considers your age when calculating your average credit score but not in the way you may anticipate. It is not always a good predictor for your credit score, therefore, it is possible for a younger person to have a higher credit score while an elderly one has a poor one
Nonetheless, typical scores rise with age. When the national average credit score was 703 in 2020, people around twenty years old had a credit score of 662 while the ones in the age of 60 and older, had a credit score of 749. Why is there an upward tendency in credit scores of age if it is not taken into account? For starters, we must earn our credit ratings over time. The reason is, the starters have a shorter credit history than the older ones.
Consider how age affects the five criteria that go into calculating a FICO score, as well as their respective weighting in the FICO scoring model:
- Credit Utilization ratio
As we get older, our income continues to rise. Our income has an impact on how much credit we are granted. When your credit usage ratio is low, you are more likely to have an impact on your credit score.
- 35% Payment History
Older accounts have more payments which might boost their scores if they are always on time or lower them if they are always late. The older you get, the more account history you will be able to accumulate.
- 10% Credit Mix
You will probably have more options to open different types of accounts as you get older. An eighteen-year-old may have merely a credit card account while a forty-year-old person can have a car loan, a personal loan, or a mortgage and many credit cards.
The above-mentioned factors add up to a higher credit score over time that is if you pay your bills on time. This explains why typical credit scores rise with age. Many bad credit issues will no longer affect your credit scores after seven years if you keep up solid credit habits.
FICO Score For Americans of Each Generation
Millennials Who are Between the Ages of 24 and 39
The points increased by 11 points. The average credit scores in the year 2020 were 679 while the average credit score of the previous year was 668
Silent Generation Who are Between the Ages of 75 and older
The points increased by one point. The average credit score for the year 2020 was 758 while the average credit score of the previous year was 757
Gen Z Who are Between the Ages of 18 to 23
The points increased with 7points. The average credit score in 2020 was 674 while that of the previous year was 688
Baby Boomers Who are Between the Ages of 56 to 74
The points increased by 5 points. The average credit score for 2020 was 736 while that of the previous year w 731
Gen X Who are Between the Ages of 40 to 55
The points increased by 10 points. The average score for the year 2020 was 698 while the average score of the previous year was 688
What Does FICO Score Mean For Your Credit?
Your credit score indicates to lenders how trustworthy you are. This means that if you have a higher credit score, you will acquire a favorable mortgage rate or favorable vehicle loan compared to when you have a lower credit score
For the creditors to be able to integrate financial data from the three major credit agencies which are TransUnion, Equifax, and Experian, they use the FICO score system. On the FICO scale, scores of 800 and above are considered excellent while scores of 580 and lower are considered as bad. FICO score ranges are depicted in a graph.
A high score can assist you to save money and so you do not have to aim for perfection. When you have a credit score in that area which is between 760 to 860 you can qualify for prime rates or in other words the lender’s lowest rate available.
At every age, there are strategies to raise your credit score. This means that you can start working on your credit at any age.
There are techniques that experts propose for raising your score and they include:
Make a Full and Timely Payment on Your Account
It is a recommendation to pay off your credit card debt in full before it becomes past due, as well as any other payments that may affect your credit score. Missed payments might linger on your credit report for up to 30% of your FICO score.
Maintain a Low Utilization Rate
The utilization rate is the measurement of how much credit you have utilized compared to the credit limit on the card. Less than 30% of your available credit is the ideal rate. You can request a higher limit to bring the balance down before the statement is released.
Try Different Scoring Systems
Except for certain financial assistance during the epidemic, lenders are now willing to consider alternative payments that do not rely on your credit. eCredable and Experian Boost are two programs worth looking into
Some factors do not affect the credit score which are state, age, and income level but there is a correlation between them and the credit score. An example is as the age increases, the average credit score increases, and vice versa. As the income levels increase, the credit score average also increases.