Here's one perk of getting old that many people don't know about -- the older you are, the more likely it is that you have a high credit score.
In our research on the average credit score, we found that the average FICO® Score for Americans who are at least 60 years old was 88 points higher than that of Americans in the 18-to-29 age range. This difference wasn't exclusive to those two groups either, as the average credit score steadily rose across each age range.
There are a few important reasons why older Americans have higher average credit scores. By knowing what they are, you may find some ways to improve your own.
1. They have longer credit histories
The length of your credit history accounts for 15% of how your FICO® Score is calculated. This factor includes the age of each credit account you have, the average age of all your accounts, and how long you've been using credit.
Older Americans have an obvious advantage here, because many of them have been using credit for decades. There's no substitute for that, and the only way for young adults to build lengthy credit histories of their own is through the passage of time.
2. They have higher incomes
First, a clarification is in order -- your income doesn't directly affect your credit score. However, credit card companies use your income to help determine the credit limit that they'll issue you. And incomes tend to go up with age as a person develops more skills and gains experience.
Since older Americans have higher average incomes, they typically also receive higher credit limits. Where a consumer in their 20s may start off with a $500 or $1,000 credit limit, someone in their 40s with a much higher salary may qualify for $15,000 or more right off the bat.
That can help those older Americans maintain a lower credit utilization ratio, which is the amount of your available credit that you're using at any one time. Credit utilization makes up 30% of your FICO® Score, and the lower it is, the better.
3. They have better payment habits
Nothing is more crucial for your credit score than your payment history, which is 35% of your FICO® Score. If you're delinquent on your credit card bill, meaning you're late on a payment by at least 30 days, it can lower your credit score by 100 points or more.
Whether it's because they're more financially stable or they're simply more aware of the importance of paying on time, older Americans have better payment habits than younger generations. Delinquency rates on credit card payments are much lower among older Americans, which means they're more likely to have strong payment histories that benefit their credit scores.
4. They've had more time to recover from credit issues
Negative marks on your credit history don't last forever. They affect your score the most when they happen and gradually have less of an impact as they move further into the past. How long this process takes depends on the severity of the issue.
Older Americans who've had a credit score drop have had plenty of time to rebuild their credit histories so their scores recover. Since younger Americans have much shorter credit histories, they've had less time to bounce back from any problems, such as missing a payment, defaulting on a loan, or applying for too many credit cards in a short period.
Old age has its (credit-related) perks
With how the credit scoring systems work, older Americans have some advantages that can help them achieve higher scores. But no matter how old you are, remember that a high credit score is ultimately a matter of following good financial habits.
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FAQs
The length of your credit history, your payment history, the amounts you owe, how recently you've opened a new line of credit and your credit mix are all factors used to generate your score. Older Americans have had more time to build and manage their credit than younger Americans who are just starting out.
Why do older people have higher credit scores? ›
The length of your credit history, your payment history, the amounts you owe, how recently you've opened a new line of credit and your credit mix are all factors used to generate your score. Older Americans have had more time to build and manage their credit than younger Americans who are just starting out.
What are 3 reasons why it is preferable to have a high credit score? ›
Here's a look at how good credit can benefit you.
- Borrow money at a better interest rate. ...
- Qualify for the best credit card deals. ...
- Get favorable terms on a new cell phone. ...
- Improve your chances of renting a home. ...
- Receive better car and home insurance rates. ...
- Skip utility deposits. ...
- Get a job.
The credit scoring algorithms calculate the average of how long all your accounts have been open. That average age of accounts is your “credit age.” It's all but impossible to get a score higher than 800 if you're young, because your credit age likely will be low.
Why do older people generally have higher credit scores than younger people? ›
Average FICO Score
For one, we have to earn our credit scores, which takes time. A younger person is more likely to have a lower credit score than an older person simply because they have shorter payment and credit histories than their older counterparts.
What age group has the best credit score? ›
One thing that improves with age is creditworthiness. A study of average credit scores by generation shows that every major demographic group has an average credit score that is better than the generation before it. And best of all is the so-called Silent Generation. This group includes people aged 78 and over.
What are the 4 main reasons credit is important? ›
A good credit score is essential when your goal is to qualify for the lowest mortgage rates, snag a stellar credit card bonus and sometimes even land your dream job. Since your credit influences so many major life decisions, it's important to build credit early and consistently.
What are 5 advantages of credit cards? ›
Credit card benefits
- Rewards such as cash back, miles, or points.
- Protection against fraud.
- Increased purchasing power.
- Not linked to a checking or savings account.
- Putting a hold on a rental car or hotel room.
- Building credit history.
“A high credit score means that you will most likely qualify for the lowest interest rates and fees for new loans and lines of credit,” McClary says. And if you're applying for a mortgage, you could save upwards of 1% in interest.
What are the 3 biggest factors impacting your credit score? ›
What Counts Toward Your Score
- Payment History: 35% Your payment history carries the most weight in factors that affect your credit score, because it reveals whether you have a history of repaying funds that are loaned to you. ...
- Amounts Owed: 30% ...
- Length of Credit History: 15% ...
- New Credit: 10% ...
- Types of Credit in Use: 10%
Called the five Cs of credit, they include capacity, capital, conditions, character, and collateral. There is no regulatory standard that requires the use of the five Cs of credit, but the majority of lenders review most of this information prior to allowing a borrower to take on debt.
Why is my credit score 4? ›
A tier 4 credit score is generally considered lower-tier credit. Those who have fallen victim to predatory funding options, like easy payday loans, or those who have suffered other financial hardships may find themselves with tier 4 credit.
Do older people have better credit scores? ›
Older adults, on average, have higher scores than younger individuals, and they have a lifetime history of paying bills. At this time, many have saved for retirement, may have fewer expenses, are not raising a family, and can afford their bills.
Does your credit score go up as you get older? ›
The age of your credit history, or how long you've been using credit, generally accounts for 15% of your total credit scores. That means that, with time, your average credit score could go up because of a longer account history.
Does credit score matter for the elderly? ›
Even if your years of homeownership are done, a good credit score can also help you get into the apartment or senior living community of your choice. “Credit scores affect far more than just the ability to get a loan or a good interest rate on a loan,” Fox said. “They can affect the ability to rent an apartment.”
What is the average credit score for a 70 year old? ›
For borrowers 60 and over, the average credit score is 749. As a person approaches retirement they have a long and detailed credit history and, again, many types of credit.
How rare is an 800 credit score? ›
How rare is an 800 credit score? An 800 credit score is not as rare as most people think, considering that roughly 23% of adults have a credit score in the 800-850 range, according to data from FICO. A score in this range allows consumers to access the best credit card offers and loans with the most favorable terms.
