Just like economic activities influence one’s credit score, the average credit score is also influenced by a person’s age. This relation of linking average credit score by age holds true in most cases, but is not universally applicable.
The average credit score in US, believed to be 693, is influenced by several economic factors. It goes on changing with every state and region. The average is influenced by the economic activities that takes place in the region, and also the average income of the people.
Basics about Credit Ratings
Your credit score by FICO credit score range, extends from 550 to 770, 550 being lowest, or poor credit score. This numerical value is derived on the basis of a mathematical formula which has been derived by FICO. The formula takes into consideration 5 different aspects of your credit related dealings, namely payment history, amounts owned, the length of credit history, new credits which have been borrowed, and lastly, the type of credit that has been borrowed.
The lenders and credit card companies from whom you borrow regularly report your bill payments and installments to the credit reporting agencies such as Experian, TansUnion, and Equifax. Upon the reporting, the formula that has been mentioned above gets reapplied, and your credit score changes accordingly. Thus, in short, the more timely installments and bills you pay, the better your credit score is going to be.
Now, if you look at the formula, you will notice that there are several things that will influence your credit rating. The following are some important points that you should bear in mind while using credit:
- 35% of your credit report, rating, and score is made up of a payment history, hence, making timely payments, and borrowing only when it is required is of essence, as it will boost your overall credit score.
- 30% of the score is made up of the total amounts that you actually owe to the lender. Thus, the more you owe, the less your score is going to be. Hence, make it a point to pay off debts on time, and again, borrow only when it is absolutely essential.
- 15% of your score is made up of the length of the total credit report. A long report is bound to invite a negation in the score.
- 10% of the report is made up of your new borrowings, hence, borrowing in a controlled and well-thought-out manner would be healthy for your credit rating.
- 10% influences the type of credit that you use. Well, this is pretty much out of your control, but avoid borrowing subprime credit cards, loans, and debts.
Overall, a wise use of credit cards and loans is recommended to have a really good credit score.
Average Credit Score by Age Group
|Age Group||Average Score|
|18 – 29||637|
|30 – 39||654|
|40 – 49||675|
|50 – 59||697|
|60 – 69||722|
There are a couple of good permutations that we can take a look at while considering credit score as per age. The first that we must know is that, when a person takes a credit card or a loan for the first time, he or she has a ‘no credit’ status. That is, there is no credit history, score, rating, and report. As time goes by, the report grows longer. Now, if this same person handles this he credit cards and loans maturely, then he or she has a good credit report and score, which goes on getting better with time and succeeding payments (assuming that they are made on time). However, on the other hand, if the person makes blunders, then he or she has a bad credit score.